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Public Provident Fund - PPF Research Team | Posted On Saturday, May 02,2009, 12:54 PM

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Public Provident Fund - PPF



Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument .PPF is a long-term, government-backed small savings scheme of the Central government started with the aim of providing old age income security to the workers in the unorganized sector and self-employed individuals. Currently, there are nearly 30 lakh PPF account holders in India across banks and post offices. Any individual (salaried or non-salaried) can open a PPF account. He/ She may also subscribe on behalf of a minor, HUF, AOP and BOI. Even NRIs can open PPF account.

An individual can have only one PPF account. Also, two adults cannot open a joint PPF account. The aggregate annual contribution by an individual on account of himself, his minor child and HUF/AOP/BOI (of which individual is member) cannot exceed Rs.70,000 otherwise the excess amount will be returned without any interest.

Currently, the interest rate offered through PPF is around 8 per cent, which is compounded annually. Interest is calculated on the lowest balance between the fifth day and last day of the calendar month and is credited to the account on March 31 every year. So to derive the maximum, the deposits should be made between 1st and 5th day of the month.

People who are interested in liquidity or small-term gains would not be excited about PPF because the duration for the investment is 15 years. However, the effective period works out to 16 years i.e., the year of opening the account and adding 15 years to it. The contribution made in the 16th financial year will not earn any interest but one can take advantage of the tax rebate.

The account holder has an option to extend the PPF account for any period in a block of five years after the minimum duration elapses. The account holder can retain the account after maturity for any period without making any additional deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.


There are certain conditions regarding the opening of public provident fund schemes in India.

  • The person who opens a Public Provident Fund has to open it in his own name. She/he can also open it for a minor who is under his guardianship. The particular individual also has to be a member of Hindu Undivided Family.
  • The Public Provident Fund schemes can be opened at the post offices that have been specified by the respective governmental authority. A few selected branches of the public sector banks can also be availed for opening the Public Provident Fund schemes.

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