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Public Provident Fund

What is a public provident fund?

You invest your money in a PPF. You get interest on the money, you invest in the public provident fund. On maturity of the PPF, you get your principal (money you have invested), back along with interest. You can make up to 12 transactions a year.

Minimum amount: You can invest a minimum amount of INR 500 in a year in a PPF.

Maximum amount: You can invest a maximum amount of INR 1.5 Lakhs in a year in a PPF.

Lock in: The PPF has a lock in period of 15 years. You can extend your PPF in blocks of 5 years, with or without making a further contribution.

If you continue your PPF after 15 years without making any contributions, you can withdraw any amount from this account, subject to a single withdrawal a year.

If you continue your PPF after 15 years and you make contributions (invest money into the PPF), then you can withdraw up to 60% of the amount in the PPF account, at the beginning of the 5 year block.

Why invest in Public Provident Fund
Safety with Returns

Safety with Returns

The investment you make in a PPF is not only safe, but also gives high interest. The interest you get is unmatched among fixed income securities.

Pledge as Collateral

Pledge as Collateral

You can pledge the amount in your PPF up to a certain limit and avail a loan. This loan being secured, you pay a lower rate of interest.

Tax Benefits

Tax Benefits

You get a tax deduction on the amount you invest in a PPF. You also get EEE benefits, which signifies a complete tax exemption.

In Minor's Name

In Minor's Name

You can open a PPF in the name of your minor child. Helps you save for your child's education and marriage.

Eligibility for Public Provident Fund

You need to be an Indian citizen to invest in the PPF. This account can be opened only in the name of a single holder and no joint account is permitted. The account can be opened in the name of a minor, by parents or legal guardian. An NRI and a HUF is not allowed to open a PPF account. A resident turned NRI is able to invest in the PPF account, through NRE/NRO bank accounts till maturity. After the completion of 15 years the amounts can be remitted to the host country. No extension is permissible for the NRI beyond the 15 year term. The amount is not taxable in India but might be taxed in the country of residence.

How much interest can you get from the PPF?

The interest on the PPF is calculated on the lowest balance between the 5th and the last day of the month. The interest rate payable by the PPF is linked to the Government securities rate.

For the FY 2015-2016 (April 1st 2015 - March 31st 2016), interest rate is 8.7% a year.

PPF enjoys EEE exemptions

"EEE" means exempt exempt exempt. The PPF enjoys a deduction under Section 80 C of the income tax act up to INR 1.5 Lakhs a year. You can invest a maximum amount of INR 1.5 Lakhs a year in a PPF and avail a deduction under Section 80 C of the income tax act on the full amount invested.

The money accumulates with time (increases as you get interest on this amount over 15 years) and no tax is charged on this amount. The money you withdraw on maturity is tax free.

PPF has a new name. Riskless and taxless.

How to apply

A public provident fund can be opened at any branch of the State Bank of India or its subsidiaries. It can also be opened at any post office and some nationalized banks, which even allow you to open an account online.

The public provident fund form can be downloaded from the SBI website. A photograph and a pan card are necessary. An identity and residence proof is a must. A passbook is given to you, which has all subscriptions, withdrawals, interest accrued and loans which are recorded.

You need to have identity and address proof as part of the KYC (Know Your Customer), procedure.

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