The public provident fund (PPF) is a top choice when planning your finances for retirement. Launched in 1986. PPF is a government backed savings scheme, with guaranteed tax-exemption on investment, maturity amount and interest earned (aka EEE benefit).
At a fixed interest rate of 7.1% this quarter, PPF is among the safest investment options for retirement and tax planning in India.
How to open a PPF account?
- A PPF account is offered by any post office or public bank and some private banks in India, for a minimum deposit of ₹100-500 each month.
- This has KYC requirement where you will need to submit the duly filled form with your Aadhaar Card copy, proof of residence, and a passport size photo.
- You can also directly open a PPF account through your bank through online banking or mobile banking.
- Notably, individuals can only open one PPF account each.
Public Provident Fund: Key highlights
| Factors | Public Provident Fund (PPF) |
|---|---|
| Tenure | 15 years, plus 5 years extensions |
| Risk | Risk-free, guaranteed return as per fixed interest rate |
| Tax saving | Under Section 80C, up to ₹1.5 lakh |
| Opening deposit | ₹100-500 |
| Access | All public banks and post offices, some private banks |
| Loan collateral | Accepted, after 1 year (up to 25% of balance) |
| Interest rate | 7.1% fixed (reviewed each quarter) |
| Who can operate | Individuals and joint accounts including minors |
| Withdrawals | Partial withdrawal after 5 years, full after 15 years |
| Sources: Clear Tax | |
How many times can you extend your PPF account after maturity?
Individuals, including minors with the help of parents, can open a PPF account. You can open one account per person for a period of 15 years. After this term, the account can be extended in blocks of five years indefinitely, with or without added contributions.
Notably, there is no upper limit on the number of times you can extend the tenure of the account as long as you extend it in the blocks of five years, as per a Clear Tax report. However, each extension can only be done upon reaching maturity.
At the end of 15 years or end of block maturity, you have a choice to withdraw the entire amount and close the account or extend it for another five years. Notably, the extension is not automatic, and you need to submit a request with the bank or post office.
What are the PPF rules of withdrawal?
There are three basic kinds of PPF withdrawal rules: Partial withdrawal, premature closure, and withdrawal after maturity. These are explained as below:
- Can partially withdraw up to 50% of balance with no penalty after five years of the account being active — Partial Withdrawal.
- Can withdraw full amount with 1% reduction in interest rate after five years of account being active — Premature closure. Notably, this is only allowed in certain cases such as due to change in residency status, for higher education fees or for medical emergencies.
- Can withdraw 100% upon maturity (15 years) of account with no penalty and tax-free — Withdrawal after maturity.
- Can withdraw up to 60% of funds over five years, with one withdrawal each year, after extending PPF tenure for five years (20-year tenure total).
How can I activate my inactive PPF account?
- You will need to submit a written letter to the bank or post office branch requesting to reactivate it, as per Clear Tax.
- It added that a minimum of ₹500 for each missed year of contributions will have to be made, along with a penalty of ₹50 for each inactive year.
- The bank / post office will process your request and reactivate the account.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.