What is a Public Provident Fund?

Public Provident Fund is scheme, that was launched by Ministry of Finance of Government of India in 1968. The objective of this scheme is to boost the habit of savings among taxpayers and to create an adequate and secure corpus for their retirement.

Who can open PPF account?

Only resident taxpayers of age 18 years or more can open a PPF account. The taxpayer can open this account in any Nationalized Bank or post office.

Some private sector banks also provide PPF service.  The taxpayer is supposed to provide his basic details along with identity and address proof while opening a PPF account.

Minors can also open a PPF account these days. However, in such case, documents related to minor’s guardian are also required to be provided.

What are the features of PPF account?

Public Provident Fund is one of most tax competent scheme, as it serves many benefits like tax exemption, retirement planning etc.

The main features of Public Provident Fund are as follows-

1. Investment amount: - At the time of opening a Public Provident Fund account, any amount from minimum of Rs. 500 and maximum of Rs. 1,50,000 must be invested every financial year. Such an investment can be made in lump sum.
2. Period: - Public Provident Fund should be maintained for at least 15 years from the year of opening the account. However, after completion of 15 years, the taxpayer can extend this account for a further block of 5 years and so on.
3. Interest rate: - Interest credited to Public Provident Fund is compounded annually. Interest rate varies every year as per the announcement by Government.
4. Withdrawals from account: - Taxpayer can withdraw sum from his PPF account, before the completion of 15 years but after fulfilling certain conditions.
5. Tax Benefits: - Taxpayer can enjoy tax benefits on investment in Public Provident Fund, as the interest earned by him is also tax-free.
6. Transfer: - PPF account. can be transferred from one branch to another of a same bank or post office. However, this account cannot be transferred in the name of another person.

Why should I opt for PPF investment?

1. Secured retirement: - Investment in Public Provident Fund gives assurance to the taxpayer regarding adequate corpus for his post-retirement.
2. Tax exemption: - Public Provident Fund scheme comes under EEE. A taxpayer gets tax benefit under section 80C on investment in Public Provident Fund, interest earned is also tax free. Moreover, the amount received by the taxpayer at the time of maturity is also tax free.
3. Interest rate: - Current interest rate for PPF is 7.6%. Interest earned on PPF varies every year which is more beneficial than the fixed interest of bank FDR. However, this interest is compounded annually.
4. Risk component: - Since Public Provident Fund is administered by Government, therefore the risk of default is comparatively low.
5. Loan facility: - Taxpayer can raise a loan from 3rd year against the balance in his Public Provident Fund Account.

Attachment of account: - PPF account of a taxpayer cannot be attached to any decree or order of any court.

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