Public Provident Fund or PPF scheme is an excellent tax saving investment option for individuals in India.
A PPF Account can be opened either in a post office or in any authorized branches of a private or nationalized bank in India.
A minimum amount of five hundred rupees is required to get started investing in PPF Account.
PPF interest rate is a compound rate that is calculated every month. If you have contributed to your Public Provident Fund account (PPF) on or before 5th of the month then you will be getting interest amount of that month i.e. For January month interest you are required to contribute on or before 5th of January month. If your contribution is after 5th of January then you will be getting interest from February month onwards (you will lose January months interest).
Present interest rate of 8.7% per year.
Investments in PPF is also eligible for Income tax deduction under section 80C of Income tax act 1961.
Up to an amount of Rs 150000 can be claimed as tax deduction under the above said section for investing in a Public Provident Fund (PPF) Account during the financial year.
This means, If your investment is lesser than Rs 150000 then such lesser amount will be allowed as tax deduction. Please remember that Rs 150000 deduction under section 80C is not available only on PPF investments. For more details read our article on Section 80C.
You can also get income tax deduction for investing money in your spouse or children’s Public Provident Fund (PPF) account.
You can invest in PPF with a minimum amount of 500 rupees and this investment per year can go up to a maximum amount of rupees 150000. Earlier limit of Rs 100000 has now been increased to Rs 150000.
You can not make more than 12 investments in a year. There is no specific interval of making payments and also no such fixed amount been specified. You have liberty of contributing at any frequency by keeping an eye on the minimum and maximum amount of your investment.
In case you are not able to make payments for a financial year then you can continue investing from the next year onwards by paying a fine of rupees 50 per year of default.
Public Provident Fund or PPF scheme will mature after 15 years and it can also be extended to another 5 years on investor’s request.
If any requirement comes then you can withdraw your invested amount from Public Provident Fund or PPF account.
But you can withdraw only after the 6th year and that to only fifty percent of the invested amount from your Public Provident Fund A/c after the end of 4th year or at the end of the immediate preceding year which ever is lower. You can withdraw only once in a year.
You can also avail loan facility from your Public Provident Fund (PPF) account only from the 3rd year onwards. Loan will be allowed to the extent of 25% of the balance in the previous year.
A non resident Indian (NRI) can not open a Public provident fund account. If such NRI has opened it while being in India and subsequently became a NRI then it will be allowed to continue such PPF account till its maturity.
In between, if the owner dies then balance amount laying in his PPF a/c will be paid even before the completion of 15 years to the nominee or the legal heir of such account holder. But such legal heir or nominee at no cost will be allowed to continue the PPF account of the deceases person.
As discussed above you can open a Public provident fund account in any authorized bank branches or a post office. Banks like SBI and ICICI are providing online facilities to which you can deposit money and balance can also be checked online.
SBI PPF account
Not all SBI branches provide this facility but most of the branches are covered. You need to check with your nearest SBI branch to know whether PPF account can be opened in that branch or not.
If in your place, they don’t offer this facility then you can try opening it in a post office (no online facility available) or in other authorized private or nationalized banks.
Ask the SBI branch officials for an account opening form. Along with the filed in application form you also need to submit self attested photo copy of your identity proof, proof of residence and 2 passport size photos. Your bank official may ask you for original documents so we request you to carry those documents along with you.
After submitting the form and getting necessary approval from SBI you will be handed over a PPF account passbook. You can update this passbook frequently to have a track of all your PPF account transactions.
To transfer online to your Public provident fund account, first you need to login to your net banking account and then transfer fund to PPF account like other online payments.
If you don’t want to do online transactions then you can personally visit SBI branch for depositing to your account.
For manual deposit you need to fill up a deposit slip and along with the slip you need to hand it over to the branch official. The branch official will deposit it and will update your PPF account passbook.
You can give a standing instruction to your SBI branch by which at a particular date the branch will automatically deduct the contribution amount mentioned there in the request form and deposit the same with your PPF account.
You also have the flexibility of transferring it from one branch to other SBI branches or from one bank to other bank.
Also read: How to open a PPF account in SBI
PPF account with ICICI Bank
Opening a PPF account with ICICI bank is very easy if you have a net bank facility with your saving bank. You need to fill up an online application from your net banking account and take a print out of that. Application form should be submitted along with your documents at your ICICI branch.
With this your PPF account will be linked to your saving bank account and you can enjoy the online services for transferring money and checking balances. To know more on ICICI bank Public provident fund scheme please visit this link.
Transfer of Public Provident Fund from a post office to SBI
Visit your post office where you maintain your PPF account and submit an application for transferring it to your SBI branch. The head post master of your post office after reviewing the application will process it and then will be sending all your details to the SBI branch.
With all these documents submitted you need to fill up an application form with the SBI branch for opening up your PPF account. You may be required to provide the identity proof, address proof and all other documents again for verification.
After all this done, SBI will provide you a new passbook for your PPF account with them. You need to keep a photo copy of the old passbook before submitting it to the post office as transaction in that book will not be reflected in SBI passbook. This will be required for your future reference and income tax deductions.
EPF vs. PPF
Most peoples are confused with employee provident fund (EPF) and public provident fund (PPF). Both EPF and PPF give you slow, steady and secure return on investment. But there are differences between these two investment options;
- Public provident fund is for self employed individuals, salaried employees and persons from unorganized sector. But EPF is only for salaried employees. (a salary employee can avail benefits from both EPF and PPF by opening both accounts)
- In Public provident fund the owner uses to contribute where as in EPF both the employee and employer contribute.
- In case of PPF the applicant needs to open an account either with an authorised bank or a post office. But in the case of EPF account, your employer will open it with employee provident fund organization (EPFO) on your request at the time or joining or after that.
- At the time of transfer of employee the balance amount in an EPF account needs to be transferred to the new EPF account opened by the new employer. Where as in the case of Public provident fund, you need not transfer the balance laying in your account at the time of transfer. But if you want to transfer your PPF account from post office to a bank or from one bank to another or from a bank to post office then that can be done on your request.
- Balance laying in your EPF account can be withdrawn on your retirement or resignation. You can withdraw complete balance amount from your PPF account after 15 years of completion.
- Return on investment in case of PPF account is 8.7% per annum while in EPF its 8.5% per annum.
- Public Provident Fund account will mature after 15 years and can be extended in blocks of 5 years for an unlimited number of times. Where your EPF account will be closed at the time of retirement or resignation but if after resignation you are joining another employer then the EPF account balance amount can be transferred to the new employer.
History of PPF interest rates
- 1.4.1986 to 14.1.2000………………………… 12%
- 15.1.2000 to 28.2.2001……………………….. 11%
- 1.3.2001 to 28.2.2002 ………………………. 9.5%
- 1.3.2002 to 28.2.2003……………………….. 9%
- 1.3.2003 to 30.11.2011………………………… 8%
- 1.12.2011 to 31.3.2012………………………… 8.6%
- 1.4.2012 to 31.3.2013………………………… 8.8%
- 1.4.2013 onward………………………………… 8.7%
PPF account a government of India scheme. All authorized banks and post offices are only acting as a agent for collecting these money on behalf of the government of India. Banks and post offices are depositing this collected money to government treasury.
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