Public Provident Fund

What is a Public Provident Fund?

The Public Provident Fund Scheme is a statutory scheme of the Central Government of India for a period of 15 years. Any individual may, on his own behalf or on behalf of a minor, of whom he is the guardian, subscribe to the Public Provident Fund any amount not less than Rs. 500 and not more than Rs. 1, 00,000 in a year. One deposit with a minimum amount of Rs.500/- is mandatory in each financial year.

Interest is not contractual but rate is notified by Ministry of Finance, Govt. of India, at the end of each year. The facility of first withdrawal can be done in the 7th year of the account, subject to a limit of 50% of the amount at credit preceding three year balance. Thereafter one withdrawal is permissible every year. Pre-mature closure of a PPF can be done only in case of death. The account holder has an option to extend the PPF account for any period in a block of 5 years on each time. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.

Non residents are not eligible to open a PPF account. Those who are contributing to GPF Fund or EDF account can also open a PPF account. No age is prescribed for opening a PPF account. The PPF account is opened in the State Bank of India or a subsidiary of the State Bank of India or in Post Office. Account is transferable from one Post office to another and from Post office to Bank and from Bank to Post office. Account is transferable from one Bank to another bank as well as within the bank to any branch.

Tax Benefits : Deposits in PPF qualify for rebate under section 80-C of Income Tax Act. The interest on deposits is totally tax free. Deposits are exempt from wealth tax also. The balance amount in PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.