PPF Stands for Public Provident Fund and is one of the most popular Investment Scheme in India.
Public provident fund is long term investment scheme. And its governed by Government of India. We treat this as retirement fund. There could be various asset class to invest and attain financial stability. Risk free, attractive feature and stable returns are main reason behind it to open a PPf account. Securing principal amount is the basic need of every individual. So, Its the most important reason we opt for PPF account.
Why PPF account ?
Public provident fund is for individuals who are looking for safe and low risk appetite. Since it comes under the government’s umbrella. Investments into ppf account is not market linked. hence investments are guaranteed . Hence it falls under low risk investment option.
We know that Public Provident Fund is low risk investment scheme. So it act as a balance in our Portfolio. During any economic crisis PPF account provides a stable return.
What is the Eligibility Criteria ?
A Indian Citizen who is a resident individual can open a PPF Account in his/her name. A minor is also eligible to open a public provident fund account. Given that it is controlled by the parents.
A non-resident individual Indian cannot open a new PPF account. But an already existing account will remain active until the maturity. But it cannot be extended for further additional 5 years. An additional benefit provided to Resident Individual. which we will discuss in detail in the article ahead.
Benefits of a PPF Account
The Below details will give us a detailed understanding of its key benefits. That will help us to understand why to open a ppf account. So let’s get into the benefits.
Tenure of Investment
A PPF account has a maturity period of 15 Years. Which means the investment will be locked-in for 15 Years. This can further be extended by 5 years after the tenure of 15 years. The extension of 5 years is available only for resident individual Indians. Citizens who get into the category of Non-Resident individual cannot avail the extension period.
To open a ppf account we must understand the minimum and maximum amount of investment. This act as a key benefit. As Minimum investment required is Rs.500 /- annually. Which makes this investment attractive. Even for low income groups. The maximum permissible amount is Rs.1,50,000/- annually. We can deposit either via lumpsum or on installment basis. A Individual can make 12 installments per year. In order to keep the account active we must not stop investing.
Option to avail Loan
PPF account is for long term (15 Years) . So, during this period we may suddenly be in need of money. Life is unpredictable. So, the PPF account provides the benefit of availing loan against the amount invested. After Completing 2 years loan benefit can be availed. Which means from the beginning of 3rd Year. To the end of 6th year from the date of activation/open a PPF account.
How much loan can be claimed ? Answer is less than or equal to 25% of the Amount invested in PPF account.
What will be the tenure of such loans ? Maximum tenure of a loan availed, against a PPF account is for 36 months.
How much Interest on a ppf account ?
Central Government of India Determines the interest rates. Currently it is 7.1% subject to updation on quarterly basis. Therefore, interest is calculated based on the minimum balance. Available on 5th day and the last day of the month.
What is the Taxation benefits ?
Tax exemptions are applicable on the amount invested in a PPF account. The entire investment value can be claimed under section 80c of the Income tax act of 1961. The maximum permissible investment in PPF is 1,50,000/-P.A. The deduction allowed under 80c is also Rs.1,50,000/- only. However Section 80c is a vast topic and various other deduction are allowed within the cap of Rs. 1,50,000. So, We can consider auditors advice on understanding sec 80c and its benefits.
The basic Point is any Principal amount invested. Into PPF account in a financial year can be claimed under Sec 80c.
The Interest Accrued is also exempted from taxation.
The maturity amount is not subject to any taxation. Tax exemption policy makes PPF account attractive . Therefore, We can open a ppf account in case any surplus amount lying in savings account. And we are looking for safer and low risk asset class for investment.
How to Withdraw from PPF account ?
On completion of tenure of PPF account. We can withdraw as usual by following general procedure.
Is Premature Withdrawal Available in PPF account ?
We have to follow and comply by various clauses. In order to withdraw funds from PPF account prematurely. In case of any Emergencies related to specific reason, partially we can withdraw. But the withdrawal option is available only after completion of 5 years. From the date of activation/open a ppf account.
How much partial withdrawal can be made ?
We can Avail up to 50% of the total balance available. So, in a single transaction per financial year succeeding in the 4th year.
How to Open a PPF Account ?
We can open a ppf account both online and offline, so both the option is available. we have to satisfy all the mentioned guidelines and eligibility criteria.
Documents required to open a ppf account ?
- Aadhar card / voter Id / Driving License, etc.
- PAN Card.
- Address Proof.
- Form in order to Declare Nominee.
- Photograph of the Individual (Passport Size).
How to Open Account OFFLINE ?
Under Offline Process, we can considered it as over the counter, So we have to Visit our near by Post Office or any Bank. On requesting, the Officer can Guide us on filling the forms. Required formalities and documentations needs to be completed. PPF account gets active after completing the procedure.
How to open Account ONLINE ?
Various Commercial banks allows its customers to open a PPF account Online, So, we have to visit their online portal. Complete necessary formalities. Rules and conditions are provided in there respective banks portal. Very few authorized banks, have the option to provide PPF facility. Click Here to know the list of banks offer PPF account.
Steps to open account in SBI – Online
- SBI net banking portal,
- Request and Enquirers tab,
- click New PPF account,
- Click Apply for PPF account,
- Branch Code,
- Nominee details and submit,
- It Display an Application number,
- print the form from “print ppf account online application,
- visit branch to complete remaining formalities, within 30 days of date of submission,
The above mentioned details is for educational purpose only. so, read all scheme related documents. Before taking any investment decisions.