Public Provident Fund- PPF- PPF in 2020

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Public Provident Fund – PPF – what is PPF?

When it comes to investment Public provident fund / PPF is preferred choice for many Indian investors. Public provident fund / PPF is seen as the safest investment option giving excellent returns. It also qualifies for tax savings under section 80C which makes it more attractive.

Public provident fund / PPF is managed by PFRDA. The PPF scheme offers an attractive rate of interest and it is tax exempted for the gains that you make from interest. Apart from EPF,

rel="noreferrer noopener" class="rank-math-link">VPF and NPS – PPF is a very popular investment option among Indian citizens.

Eligibility to open a PPF account

The eligibility criteria to open a PPF account are mentioned below:

  • All Indian citizens are eligible to open a PPF account.
  • An individual can open only one account under his/her name. However, another account can be opened by the individual on behalf of a minor.
  • Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not allowed to open a PPF account.
Public provident fund

How to open a PPF account?

Individuals can open a PPF account at any bank which offer PPF service or at post offices. The documents required to open a PPF account is mentioned below:

  • The application form.
  • ID proof such as Aadhaar card, Permanent Account Number (PAN) card, passport, etc., must be submitted.
  • Address proof with the current address mentioned on it should be submitted.
  • Signature proof.
  • After submission of the above documents, the amount that is required to open a PPF account can be deposited.

Some of the key link to Public provident fund / PPF are as below:-

ICICI Bank link for PPF – https://www.icicibank.com/Personal-Banking/investments/ppf/ppf.page 
SBI link for PPf – https://sbi.co.in/web/personal-banking/investments-deposits/govt-schemes/ppf 

Public Provident Fund – What are the features of a PPF account?

The main features of the PPF account are mentioned below:

  • Duration of the Public provident fund / PPF account: The minimum duration of a PPF account is 15 years. Account holders can extend the duration of the account by a block of 5 years.
  • The minimum amount required to open a PPF account: – The amount that is required to open a PPF account is Rs.100. In a year, if the annual investment that is made towards the account exceeds Rs.1.5 lakh then no interest will be earned on the excess amount, and no tax deductions can be claimed as well.
  • An individual can open only one PPF account under his/her name. Under the PPF scheme, joint accounts cannot be opened.
  • The minimum and maximum investment that can be made in a financial year are Rs.500 and Rs.1.5 lakh, respectively. PPF Investments can be paid in a lump sum or in instalments. The maximum number of instalments that are allowed is 12.
  • Deposits must be made at least once a year for 15 years.

Is PPF account Safe?

Public provident fund / PPF account offers risk-free, guaranteed returns, and capital protection as it is backed by the Government of India. Therefore, opening a PPF account comes with minimal risks.

Can I take loans against a PPF account?

Between the third and fifth financial year from the date of opening the PPF account, PPF loans can be availed against the account. The amount that can be availed as a loan is 25% of the investments that have been made at the end of the second financial year. Individuals can also avail a loan after the sixth financial year as well. However, the first loan must be completely paid before availing a second loan.

What is the PPF Interest Rate in 2020?

Currently, the rate of interest that is provided on a Public provident fund / PPF account is 7.1% p.a. and it is compounded on an annual basis. The interest is paid on March 31 and the PPF interest rate is set by the Finance Ministry on a yearly basis. The calculation of interest is based on the minimum balance that is available between the close of the fifth day and the last day of the month.

What are PPF Tax benefits?

Investments that are made under a Public provident fund / PPF account come under the Exempt-Exempt-Exempt (EEE) category. Therefore, under Section 80C of the Income Tax Act, all deposits made towards a PPF account are tax exempt. The amount that has been saved as well as the interest that has been generated are also exempt from tax when the individual withdraws the amount from the PPF account.

What is the lock-in period for PPF?

Public provident fund / PPF has 15 years of lock-in period from the day you start investing in it. However, if you need to withdraw money from your PPF account then you can do a premature withdrawal from PPF account with certain conditions.

Can I do Premature closure of a PPF?

After completion of 5 years is it possible for individuals to opt for premature closure. However, premature closure is allowed in case of treating diseases that can cause harm to the life to the life of the PPF account holder, parents, children, or spouse. For which, documents from an accomplished medical authority must be submitted.

Premature closure is allowed in case of higher studies of the minor account holder or for the account holder as well. However, documents such as fee bill and the admission confirmation from a recognized university in India or abroad must be submitted.

What is the procedure for PPF Withdrawal?

Individuals can close the PPF account only after the completion of the 15 years. Once the 15 years is completed, the account holder can withdraw the entire amount that has been saved in the account as well as the interest that has been generated.

However, in case the account holders need funds, partial withdrawal of funds is available after completion of 6 years of opening the account. The account holder can withdraw 50% of the funds that are available after the fourth year in case of PPF premature withdrawal. It can either be at the end of the preceding year or the year before which the amount is withdrawn, whichever is lower. However, account holders are allowed to make withdrawals only once a year.

Why should I invest in Public Provident Fund(PPF)?

Attractive long-term investments: With a deposit period of 15 years and a lock-in period of 7 years, these accounts serve long-term investment goals. With interest rates compounded annually, effective returns tend to be more attractive vis-a-vis bank FDs.
Useful for retirement planning: Long-tenures, compounded, tax-free returns and capital protection make this an ideal option for building a retirement corpus.
Tax-free returns: Tax-free interest and withdrawals and tax-deductible investments.
Low-risk: Being government-backed, there is a low risk of default.
Easily accessible: PPF accounts can be opened at nationalized, public banks or post offices and select private banks, all of which have a wide reach. Accounts can be opened online as well.
No attachment: PPF funds can’t be attached under a court order or laid claim to by creditors.

Is PPF better than mutual funds?

PPF and mutual funds are 2 different kinds of investment options. PPF in one hand provides safe secure and guaranteed returns whereas equity mutual funds may provide higher returns compared to PPF in long run and have risks of losing capital associated with it.
PPF has a lock-in period of 15 years which makes it il-liquid whereas most of the equity mutual funds are open-ended and can give you a lot of flexibility on liquidity.

Public Provident Fund – PPF interest rate history

YearRate of Interest
From 1 July 2019 to 31 December 20197.90%
From 1 October 2018 to 30 June 20198.00%
From 1 January 2018 to 31 September 20187.60%
From 1 July 2017 to 31 December 20177.80%
From 1 April 2017 to 30 June 20177.90%
From 1 October 2016 to 31 March 20178.00%
From 1 April 2016 to 30 September 20168.10%
From 1 April 2013 to 31 March 20168.70%
From 1 April 2012 to 31 March 20138.80%
From 1 December 2011 to 31 March 20128.60%
From 1 March 2003 to 30 November 20118.00%
From 1 March 2002 to 28 February 20039.00%
From 1 March 2001 to 28 February 20029.50%
From 15 January 2000 to 28 February 200111.00%
From 1 April 1999 to 14 January 200012.00%
From 1 April 1986 to 31 March 199912.00%
1985-8610.00%
1984-859.50%
1983-849.00%
1982-838.50%
1981-828.50%
1980-818.00%
1979-807.50%
1978-797.50%
1977-787.50%
1976-777.00%
1975-767.00%
From 1.8.1974 to 31.3.19757.00%
From 1.4.1974 to 31.7.19745.80%
1973-745.30%
1972-735.00%
1971-725.00%
1970-715.00%
1969-704.80%
1968-694.80%


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