Public Provident Fund (India)

The Public Provident Fund is a savings-cum-tax-saving instrument in India, introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.

Individuals who are residents of India are eligible to open their account under the Public Provident Fund.& can save from tax free

A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of Rs 1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year. There must be a guardian for PPF accounts opened in the name of minor children. Parents can act as guardians in such PPF accounts of minor children. Any amount deposited in excess of Rs 1.5 lacs in a financial year won't earn any interest. The amount can be deposited in lump sum or in a maximum of 12 installments per year.

The Ministry of Finance, Government of India announces the rate of interest for PPF account every quarter. The current interest rate effective from 1 July 2017 is 7.8% Per Annum' (compounded annually). Interest will be paid on 31 March every year. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.

Original duration is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each.

Subscriber has 3 options once the maturity period is over.

Loan facility available from 3rd financial year up to 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% more than the prevailing interest on PPF. However, the rate of interest of 1% more than PPF interest p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2013.

Up to a maximum of 25 per cent of the balance at the end of the 2nd immediately preceding year would be allowed as loan. Such withdrawals are to be repaid within 36 months.

A second loan could be availed as long as you are within the 3rd and before the 6th year, and only if the first one is fully repaid. Also note that once you become eligible for withdrawals, no loans would be permitted. Inactive accounts or discontinued accounts are not eligible for loan.

The public provident fund is established by the central government. One can voluntarily open an account with any nationalized bank,selected authorized private bank or post office. The account can be opened in the name of individuals including minor.

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