Public Provident Fund – A savings-cum-investment vehicle

Public Provident Fund

Suppose you ask the investment gurus, Tax bachana hai, Paise save kaise kare? Invariably, you get an answer that includes PPF as one of the savings avenues that also help to save tax. So what is PPF, and how does the concept work? Let us understand these points in detail.

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What is PPF?

The Public Provident Fund (PPF) was introduced in 1968, aiming to mobilize small savings to convert them into an investment with a returns component attached to it. In simple words, you can call PPF a savings-cum-tax-savings instrument that allows you to save money for your future besides reducing your tax liability as defined under Sec 80C of the IT Act.
So, PPF is one of the best Paise save karne ka tarika, which also helps you save tax.
This tabular information should explain what the PPF is all about in brief.

Minimum Investment Amount

Rs 500

Maximum Investment Amount

Rs 1.50 lakhs per annum


15 years

Interest Rate

7.1% per annum

Risk Profile

Guaranteed risk-free returns

Tax Benefits

Sec 80C benefits up to Rs 1.50 lakhs.

In a nutshell,

  • PPF is an excellent investment option for people having a low-risk appetite.
  • Since the Indian Government backs this scheme, it ensures guaranteed returns. Therefore, it is not a market-linked scheme with a high-risk-high-gain component attached.
  • PPF deposits help you save on your tax liabilities.

Here are the essential features of the Public Provident Fund (PPF) account.

  • Investment Limit – The scheme allows for a minimum investment of Rs 500 and a maximum of Rs 1.50 lakhs. It provides for a lumpsum investment or in a maximum of twelve installments.
  • Investment over the limit – An investor can deposit more than Rs 1.50 lakhs in the PPF account in a year but will not receive any interest on the amount exceeding Rs 1.50 lakhs. Similarly, tax concessions are restricted to Rs 1.50 lakhs.
  • Tenure – The maximum tenure envisaged in the scheme is 15 years. However, investors can extend it in blocks of five years, depending on their preferences.
  • Deposit Frequency – At least one deposit into the PPF account every year for 15 years
  • Joint Accounts – The PPF scheme does not allow the opening of joint accounts.
  • Nomination – The account holder can make multiple nominations in a PPF account, apportioning each nominee’s share.
  • Risk Factor – Since the Indian Government guarantees the return on the investment, there is no risk involved in investing in PPF accounts.
  • Loans available – The account holder can take loans against the PPF deposit. However, specific conditions apply for the sanction of these loans.

Who can open a PPF account?

Any Indian resident individual can open a PPF account. One citizen can open only one PPF account. However, an individual can add his name to a PPF account opened in the name of a minor. NRIs and HUFs cannot open a PPF account.

How to withdraw from a PPF account?

    • The account holder can withdraw the PPF balances on the account’s maturity. The account stands closed on maturity.
    • The PPF scheme allows for one partial withdrawal annually from the seventh year onwards. The maximum withdrawal is restricted to the lower of the following.
      • 50% of the amount at the end of the fourth preceding year OR
      • 50% of the amount at the end of the preceding year.

You Can Earn 3 to 4 Times More Than A Recurring Deposit 

Tax benefits of investing in PPF A/c

The PPF account is unique as it falls under the EEE category. Therefore, tax exemptions are available at the investment stage, interest payments, and the accumulated amount.

However, the maximum investment is restricted to Rs 1.50 lakhs for tax and interest benefits.

Other Unique features of the PPF account

The PPF account cannot be closed before its maturity. However, the account holder can transfer the account from one place to another. However, the account can be closed on the account holder’s demise, and the balance is payable to the nominees according to the account holder’s instructions obtained when opening the account.

The eligible account holder can open the PPF account online.

As of date, the interest receivable on a PPF account is 7.1% per annum

How much of salary should be saved towards the PPF A/c?

It depends on the individual’s preference and capabilities. Please note that the tax concessions are available under Sec 80C, including other investments, like NSCs, life insurance, housing loan interest repayment, etc. The maximum amount available for exemption is Rs 1.50 lakhs.

Accordingly, an individual can decide on the savings amount. However, one should deposit a minimum of Rs 500 per year in the account to keep it alive.

To Sum Up

If you ask Paise save kaise kare, I suggest that the Public Provident Fund (PPF) be the Paise save karne ka tarika. The PPF account is the perfect example of a savings-cum-investment avenue.

The National Savings Institute of the Ministry of Finance developed the Public Provident Fund in 1968 as a savings-cum-tax-saving device in India. The scheme's principal goal is to encourage people to save small amounts of money by providing a safe investment with tax benefits.

PPF is used as a tool by individuals to build a corpus for their retirement by putting aside sums of money regularly, over long periods of time. You can invest a minimum of Rs. 500 and a maximum of Rs. 1,50,000 in a financial year.  A PPF has a minimum tenure of 15 years. You can extend it in blocks of 5 years if you wish.

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