PPF - Tax Savings

PPF – Public Provident Fund – How to Open, Features, Deductions

Public Provident Fund, commonly known as PPF offers an attractive interest of 8%. Read below to understand more about history of PPF , how to open a PPF account, tax benefits with it etc.

History of Public Provident Fund

  • PPF was introduced in 1968 by the National Savings Institute of the Ministry of Finance.
  • Central Government fully guarantees these deposits.
  • Aim of introduction of this scheme was to offer a savings-cum-tax savings investment, to promote small savings by individuals.

What is a PPF Account and how to open it?

  • It is a long term investment, with interest of 8% and no taxes on the interest and returns.
  • PPF falls under EEE(Exempt, Exempt, Exempt) Category, where the deposits made are exempt under Section 80C and the accumulated interest & amount is also mom taxable.
  • Post office and all the nationalized banks are authorized to open PPF account for an individual
  • To open a PPF Account you need to submit an application with KYC documents such as an identity proof & address proof.

Features of PPF Account

  • Payment more for Deposits – Can be via cash, online trasfer or a cheque
  • Only Indian Residents can open a PPF account though an NRI can contribute to his account if it was opened when he was in India.
  • PPF is fully guaranteed by Indian Government
  • Deposits should be in the range ₹500 to ₹1.5 Lakh – maximum of 12 deposits are allowed in a Financial Year and maximum limit per year is ₹1.5 Lakh
  • PPF has a minimum lock in of 15 years and can be increased in blocks of 5 years after that – partial withdrawls can be done after 5th FY
  • PPF account can only be opened by an individual and not two people or a group of people.
  • Like an insurance, you can have a nominee for a PPF account as well.

Loan Facility

  • An account holder is eligible to take loan from 3rd FY onward till 6th FY
  • Loan amount is capped at 25% of the PPF Balance a year before.
  • Rate of interest for Loan is 2% higher than the interest rate on PF account – so loan interest rate will vary as the PPF interest rate varies – but one the loan is taken the loan interest rate is set at that particular rate.
  • An individual has to pay off the previous loan(if any) to apply for a new loan against PPF
  • Loan has to be returned within 36 months
  • Repayment of Loan can be done as a lump sum or some monthly installments
  • After the principal amount is paid, the interest can be paid in a maximum of 2 installments

PPF Withdrawl

Read here to know about PPF withdrawl in detail.

As always it is difficult to locate all the documents while opening any type of account, with Sorted AI you can access your KYC documents on one touch and also share it via whatsapp and gmail.

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