What is Public Provident Fund Account (PPF) | PPF Account Benefits


zero risk high returns deposit scheme

Public Provident Fund Account (PPF)

Govt of india runs various small saving schemes through Post office or Banks to encourage saving habits among people. Public Provident Fund Account (PPF) is also one such scheme which is being run to help people plan and invest to meet their long term goals like children higher education, children’s marriage expenses, construction of house, financial security in their old age etc. Public Provident Fund Scheme is very popular deposit scheme as it offers various benefits.

Main features of Public Provident Fund Scheme

  • Govt backed small saving scheme
  • Best Scheme for long term as the scheme is having lock-in period of 15 years
  • Lock-in period and Withdrawal restrictions make one to save regularly for long term needs by default
  • Minimum investment is Rs.500/- and Maximum Rs 1.50 lakhs in a financial year
  • Maximum limit of Rs. 1.50 lakh shall be inclusive of the deposits made in his/her own account and in the account opened on behalf of minor
  • Only one account can be opened
  • Deposits can be made in lump-sum or in instalments
  • Amount deposited qualifies for deduction under section 80C of Income Tax Act
  • Maturity Amount is Tax Free. However, as per Budget 2021, interest earned on contribution made over and above Rs 2.50 lakh in a Financial year will be subject to tax. Presently, PPF investment limit is Rs 1.50 lakh less that stipulated ceiling of Rs 2.50 lakhs. Hence, not applicable
  • Account can be extended for further block of 5 years and so on (within one year of maturity)
  • Interest rate is not fixed for the duration of deposit and subject to change every quarter
  • Interest is credited annually and re-invested in the scheme
  • Loan against the outstanding balance in PPF account can be availed
  • Withdrawal from PPF account is also available subject to certain conditions
  • Pre-mature closure of account is permitted subject to certain conditions
  • Zero risk high returns deposit scheme

Eligibility Criteria for opening Public Provident Fund Account (PPF)

  • An individual above 18 years of age
  • Guardian on behalf of minor/ person of unsound mind
  • Non-resident Indians are not authorised to open the Public Provident Fund account

Latest Public Provident Fund Account (PPF) Interest Rate

  • Interest rate is 7.10 % p.a. compounded annually
  • Interest shall be calculated for the calendar month on the lowest balance in the account between the close of the fifth day and the end of the month
  • Interest is credited to the account at the end of each year
  • Interest Rate is subject to change every quarter like any other small saving schemes of Govt

How many times PPF Account can be extended

PPF account can be extended for a further block of 5 years on expiry of initial period of 15 years and so on.

Loan Facility against PPF Account

  • Loan can be taken after the expiry of one year from the end of the FY in which the initial subscription was made (i.e. A/c open during 2010-11, loan can be taken in 2012-13).
  • Loan can be taken before expiry of five years from the end of the year in which the initial subscription was made.
  • Loan can be taken up to 25% of balance to his credit at the end of the second year immediately preceding the year in which loan is applied. (i.e. if loan taken during 2012-13, 25% of balance credit on 31.03.2011)
  • Only one loan can be taken in a Financial Year
  • Second loan can be availed only after closing of first loan

PPF Account Premature Closure

Premature closure of PPF account is permitted after 5 years from the end of the year in which the account was opened (From FY 2020-21 if account opened during FY 2014—15) subject to fulfilment of following conditions:

  • In case of life-threatening disease of account holder, spouse or dependent children
  • In case of higher education of account holder or dependent children
  • In case of change of resident status of account holder (i.e. became NRI)

At the time of premature closure of PPF account 1% interest shall be deducted from the date of account opening / date of extension as applicable.

Death of PPF account Holder

  • In case of death of the Public Provident Fund account holder, the account shall be closed mandatorily and cannot be continued in any case by anyone
  • At the time of closure due to death, rate of interest applicable for PPF scheme shall be paid till the end of the preceding month in which the account is closed

Advantages of Public Provident Fund Account (PPF) 

  • Easy to open
  • Govt Backed Deposit Scheme
  • Higher Interest Rate
  • Minimum deposit of Rs 500/- in a financial year
  • Maximum deposit amount of Rs 1.50 lakhs in a financial year
  • Facility to deposit lumpsum or in instalments during the year
  • Tax Benefits on amount deposited under 80C of Income Tax Act, 1961
  • Maturity amount is Tax free
  • Pre-mature withdrawal is allowed subject to certain conditions
  • Loan facility available
  • Best deposit scheme to earn higher interest rate for ever

Disadvantages of Public Provident Fund Account (PPF)

  • Higher lock-in period of 15 years
  • Interest rate is not fixed and subject to change every quarter
  • Compounding is at yearly intervals

Pros & Cons of Public Provident Fund Account (PPF) Scheme – Analysis

  • Higher lock-in period helps in saving big amount, otherwise one may tend to break the deposit for any short-term need.
  • Interest rate is not fixed but still higher in comparison to various other schemes
  • This scheme is not for anyone who is looking to deposit for short term needs.
  • Compounding is at yearly intervals but still with higher interest rate and tax benefits associated with the scheme, one can prefer to deposit in PPF Account

Zero Risk High Returns deposit scheme

Public Provident Fund Account (PPF) is one of the best investment schemes which offers highest returns with zero risk in comparison to many other investment options. It’s one of the best investment scheme which gives zero risk high returns.

Is PPF account Best Investment Scheme for Long Term

PPF account is one of the best schemes for investment with zero risk considering that it is backed by govt of India and offers attractive interest rate. Therefore, anyone who is looking for zero risk high returns deposit scheme, should invest in it.

PPF Interest Rate history from 1968

Table View in Landscape Mode only

Year

Rate of interest (p.a.)

Year

Rate of interest (p.a.)

Year

Rate of interest (p.a.)

1968

4.80%

1979-80

7.50%

From 1.3.2003 to 30.11.2011

8.00%

1969-70

4.80%

1980-81

8%

From 1.12.2011 to 31.3.12

8.60%

1970-71

5%

1981-82

8.50%

From 1.04.2012 to 31.3.2013

8.80%

1971-72

5%

1982-83

8.50%

From 1.04.2013 to 31.03.2016

8.70%

1972-73

5%

1983-84

9%

From 1.04.2016 to 30.09.2016

8.10%

1973-74

5.30%

1984-85

9.50%

From 1.10.2016 to 31.03.2017

8.00%

From 1.4.1974 to 31.7.1974

5.80%

1985-86

 10%

From 01.04.2017 to 30.06.2017

7.90%

From 1.8.1974 to 31.3. 1975

7%

From 1.4.1986 to 31.3.1999

 12%

From 01.07.2017 to 31.12.2017

7.80%

1975-76

7%

From 1.4.1999 to 14.1.2000

 12%

From 01.01.2018 to 30.09.2018

7.60%

1976-77

7%

From 15.1.2000 to 28.2.2001

 11%

From 01.10.2018 onwards

8.00%

1977-78

7.50%

From 1.3.2001 to 28.2.2002

9.50%

From 01.04.2020 onwards

7.10%

1978-79

7.50%

From 1.3.2002 to 28.2.2003

9%

   

Frequently Asked Questions

Q - What is PPF Scheme?

A - The Public Provident Fund (PPF) scheme is a popular long term investment option backed by the Government of India, offers attractive interest rate and returns that are fully exempted from tax. 

Q - Can I extend the tenure of PPF investments beyond maturity period of 15 years?

A - Investors can extend the tenure of their PPF investment beyond 15 years from the date of initial investment with a block of 5 years.

Q - Can NRI’s open a PPF account?

A - No. A PPF account cannot be opened by NRI’s.

Q - Can I get tax benefit on my PPF investment?

A - Tax benefits can be availed under section 80C for the amount invested and the interest accrued is tax free.

Q - What is the minimum amount to be deposited in a PPF account per year?

A - Customers need to deposit minimum of Rs. 500 in the PPF account every financial year.

Q - What are the benefits of PPF?

A - It is risk free since it is backed by the Government of India, tax benefit on both the interest earned and the principal invested, and the rate of interest is a little higher than bank fixed deposits.

Q - What are the disadvantages of PPF?

A - The biggest disadvantage of a PPF scheme is the lack of liquidity since your money will be locked in for 15 years. However there is a facility to avail of loans from your PPF account after a few years. You can also withdraw a part of the accrued sum prematurely from the start of the seventh financial year.

Q - What is the minimum age for opening a PPF account?

A - You have to be over 18 to open a PPF account. However, parents can open PPF accounts in the names of children, and operate accounts as their guardians until they reach the age of 18.

Q - Can I deposit more than Rs 1.50 lakh in PPF?

A - No you can’t. The maximum you can invest in a PPF scheme is Rs 1.50 lakh every financial year.

Q - Can I have two PPF accounts?

A - An individual is allowed to open only one account. However, you can open accounts in the names of your minor children.

Highest Interest Rate on Savings Account

Upto Rs 1 lakh

BankInterest
Utkarsh Small Finance Bank5.00 % p.a.
RBL4.50 % p.a.
ESAF Small Finance Bank4.00 % p.a.
Suryoday Small Finance Bank4.00 % p.a.
Indusind4.00 % p.a.