As a top long-term investment choice in India, PPF provides tax benefits along with certain returns on your capital and safe growth opportunities. The government of India supports this product by letting people save money to grow wealth and pay less income taxes. PPF stands as the top pick among safe investors who need regular money growth from their funds.
In this article, you will get the detailed information about the PPF, its features and benefits, eligibility, application process and much more.
Overview
The table below highlights the key instances of the PPF Account:-
| Aspect | Details |
|---|
| Interest Rate | 7.1% per annum (compounded annually) |
| Minimum Investment | ₹500 |
| Maximum Investment | ₹1.5 lakh per annum |
| Tenure | 15 years (extendable by 5-year blocks) |
| Risk Profile | Guaranteed, risk-free returns |
| Tax Benefit | Up to ₹1.5 lakh under Section 80C |
What Is A Public Provident Fund?
PPF is a long-term investment scheme which is backed by the government and targets saving through small savings while offering tax incentives along with riskless returns. It is fit for those who want to maintain steady investment returns and diversify their investment portfolio.
What Is A PPF Account?
PPF Account is a secured, absolutely risk-free investment option, and it is fully guaranteed by the Government of India. This policy is well-loved by investors, especially the risk-verse, because it both acts as a tax savings feature and as a mechanism for spreading risk across investments. In this system of calculation, interest is calculated for the month in which deposits are made, and therefore, the deposits should be made before the 5th of the month.
Features And Benefits Of The PPF
The Public Provident Fund (PPF) is a long-term savings scheme which encourages disciplined savings among individuals while providing tax benefits. It is a risk-free investment option offering guaranteed returns and various flexible features. Below are the key features and benefits of a PPF account:
-
Tenure: 15 years, but may be renewed in intervals of 5 years.
-
Investment Limits: At least ₹500 and up to ₹1,50,000 a year.
-
Deposit Frequency: Once a year for the last 15 years.
-
Nomination: With or without an account opening, the company can assign a nominee for the account holder.
-
Risk-Free: Though partially Indian government-funded, with the added feature of assured returns.
-
Partial Withdrawals: Permitted from the 5th financial year of operation of the bank.
-
Tax Benefits: Tax-free under Section 80C; interest as well as the maturity amount is tax-free.
What Is The PPF Interest Rate?
The nominal interest rate for the PPF for the year 2025 is 7.1 % per annum and compounded annually.
-
To earn interest for a particular month, one has to open a PPF account and deposit before the 5th of that month.
-
Any deposits made after the 5th of a particular month will not attract interest for that month.
-
The interest rate is determined and declared by the Finance Ministry and is paid annually on the 31st of March.
-
Interest is charged on the smallest whole amount at any time between the 5th and the end of the month.
Tip: Paying before the 5th guarantees you do not lose any interest on the deposited amount. For modelling of your returns, use the PPF calculator.
How Does The PPF Account Work?
A PPF account is an investment account that was designed to be locked for 15 years before the holder can gain access to the account.
It is flexible in:-
-
Loan: One can take a loan against the PPF account balance.
-
Withdrawals: Partial withdrawals are allowed from the 6th year.
-
Extension: The account can be extended after 15 years in intervals of 5 years with or without deposits.
What Is The PPF Account Eligibility Criteria?
The Public Provident Fund (PPF) account is designed to promote savings among Indian citizens, offering attractive returns and tax benefits. However, the scheme has specific eligibility criteria and restrictions regarding who can open and maintain a PPF account. Below are the details of eligibility and non-eligibility for opening a PPF account:
Eligibility:
The following are the key criteria for opening a PPF account:-
-
Any Indian citizen can open a PPF account.
-
One individual can have only one account, except for a second account in a minor’s name.
Not Eligible:
The following are not eligible for opening a PPF Account:-
-
NRIs (Non-Resident Indians) and HUFs (Hindu Undivided Families).
-
If NRIs or HUFs already have a PPF account, they can maintain it until maturity, but cannot extend it beyond 15 years.
How To Open A PPF Account?
A PPF account can be opened through Post Offices, Nationalised Banks (e.g., SBI, PNB) or with Private Banks (e.g., ICICI, HDFC, Axis Bank).
Documents Required For Opening A PPF Account
The following list of documents is required to apply for opening a PPF Account.
-
Account opening form.
-
KYC documents (Aadhaar, Voter ID and the rest of it).
-
Address proof.
-
Nominee declaration form.
-
Passport-size photograph.
Process To Open A PPF Account Online
Opening a PPF account online is a quick and hassle-free process through the Internet or mobile banking. It allows individuals to complete the procedure from the comfort of their homes. Follow the steps below to get started:
Step 1: Log in to the internet or mobile banking.
Step 2: Select “Open a PPF Account.”
Step 3: Select either a Self Account or a Minor Account.
Step 4: You can fill in all the details required and the deposit amount.
Step 5: Have to apply with OTP verification.
Step 6: Your PPF account is created on the spot.
Process To Open A PPF Account In A Post Office
For those who prefer offline methods, opening a PPF account at a post office is a straightforward process. This option involves submitting physical documents and making the initial deposit in person. The steps are as follows:
Step 1: Go to the nearest post office and pick up the application form.
Step 2: Bring it in with the necessary documents and an ID photo.
Step 3: Pay the first money instalment (₹500 to ₹1,50,000).
Step 4: You should later be able to access your PPF passbook once the account is complete.
Loan Against PPF
A PPF account offers the option to take a loan against the balance under certain conditions, making it a valuable financial tool in times of need. This facility comes with specific eligibility criteria and rules regarding repayment and interest rates, as detailed below:
Eligibility:
Rules for Loans:
-
This kind of loan may only be taken if the first loan has been paid in its entirety.
-
Each loan that is paid out within 36 months comes with a one per cent interest rate per year.
-
If the loans are not refinanced within 36 months, an interest rate of 6% on the outstanding amount of credit will be charged.
PPF Amount Withdrawal
You can access your PPF account funds either completely or partially, though the conditions differ for each option. PPF offers withdrawal options, and insights about account conditions can be found below.
1. Full Withdrawal:
-
Permissible after fifteen years of the formation of the account only.
-
At maturity, the account can be closed, and the entire balance, including interest, may be withdrawn.
2. Partial Withdrawal (Before 15 Years):
-
Permitted from the 6th year upward, and therefore, provided 5 years of experience have been accumulated.
-
One is allowed to withdraw not more than fifty per cent of his/her account balance at the end of the fourth year or the last financial year.
-
Only one partial withdrawal can be made within any one calendar year.
Procedure For Withdrawal From PPF
Withdrawing money from a PPF account requires following a prescribed process, including filling out and submitting a withdrawal form. Here’s how to complete the withdrawal process step-by-step:
Step 1: Obtain the Withdrawal Form
- Obtain Form 3/Form C from the concerned bank or post office where you operate a PPF account.
Step 2: Fill the Form
- Some of the finer points include your PPF account number, the amount to be withdrawn, years passed since the account was opened.
Step 3: Submit the Form
- After completion of the form, encash and submit the form to the bank or post office in which the PPF account is maintained.
- Attach a copy of your PPF passbook.
PPF Tax Benefits
The main advantage of PPF accounts comes from tax advantages. PPF benefits taxpayers through Section 80C tax deductions while keeping its total returns untaxed. The following section clarifies PPF tax advantages.
1. Section 80C of the Income Tax Act allows tax-deduction benefits for deposits of up to ₹150,000 every financial year.
2. The entire amount accrued, along with interest, is also tax-free.
3. Account Restrictions:
-
Annual limit Deposit: ₹150,000 (in others, this is limited for a full financial year, which runs from 1st April to 31st March).
-
Early closure is not permitted unless the account holder is dead.
Process To Close A PPF Account
A PPF account can be closed only upon completion of the mandated period of 15 years; the process is as follows:
Once a PPF account completes its full term of 15 years, it becomes eligible for a full withdrawal. In exceptional cases, it allows for an early partial withdrawal, which may be up to 50%, after completion of a minimum of 5 years of investment towards health emergencies or higher education.
Follow this with an application process for closure:
Step 1: You must complete Form C and attach your PPF passbook.
Step 2: Apply to the post office or bank branch where you maintain your account.
Step 3: Your request will be processed for closure, and money will be transferred to your linked savings account.
Can You Close The PPF Account Before Maturity?
After 5 years, "premature closure" can be applied only for the following reasons, such as:
-
The account holder or any of his dependents has a life-threatening ailment.
-
The account holder wants to cover the cost of his or her higher education.
-
Any change of residence status.
Process Of Transfer Of A PPF Account
Generally, the PPF accounts can be transferred to banks, post offices, or branches of a bank or post office. Follow the steps mentioned below:
Step 1: Request the transfer application form at the branch where the account is held.
Step 2: Fill out the form with the required details.
Step 3: The existing branch will process your request and send the account documents to the new branch.
Step 4: At the new branch, submit a fresh account opening form along with the passbook. You may update the nominee at this stage.
Step 5: Once processed, the account will be successfully transferred.
Participating Banks Offering PPF Account
One can open a Public Provident Fund account either at a nearby post office or via a participant bank. That makes it so easy for anyone to manage their investments. Below is a list of banks from which a person can open a PPF account:
How To Link Aadhaar With A PPF Account Online?
Including your Aadhaar number in your PPF account helps you meet legal demands and perform payments effortlessly. You can perform the task quickly from your Internet banking account. Here's how:
Step 1: Log in to your internet banking account.
Step 2: Click on the option to register the Aadhaar number.
Step 3: Type in your 12-digit Aadhaar number and submit.
Step 4: This will link your Aadhaar number with your PPF account.
Step 5: To confirm that the linking has been done successfully, use the ‘Inquiry’ option.
How To Activate An Inactive PPF Account?
You can restore a dormant PPF account through basic procedures when deposits are missed. Reactivating a PPF account requires you to resolve all outstanding items and pay a small charge. Here is how you can bring an inactive PPF account back to active status.
Step 1: A written request is submitted to the bank or post office.
Step 2: Pay a minimum of ₹500 for each year of discontinuation of deposits and ₹50 as a penalty for each year of inactivity.
Step 3: Thereupon, the bank or post office will accept the request for the revival of the PPF account.
Comparison of PPF, Mutual Funds, Fixed Deposits (FDs), and LIC
The below table gives the insights of the brief comparison of the PPF, Mutual Funds and FD.
| Aspect | Public Provident Fund (PPF) | Mutual Funds | Fixed Deposits (FDs) | Life Insurance Corporation (LIC) |
|---|
| Definition | A government-backed savings scheme offering guaranteed returns. | An investment vehicle that pools money to invest in stocks, bonds, etc. | A savings instrument with guaranteed returns and fixed interest rates. | An insurance provider offering risk coverage and investment products. |
| Returns | Guaranteed returns set by the government (current rate ~7-8%). | Market-linked returns; are higher but subject to market volatility. | Fixed returns based on bank rates, ranging from 3-7% annually. | Provides coverage with returns depending on the type of policy. |
| Tax Benefits | Tax-free under Section 80C and EEE category. | ELSS funds are eligible for Section 80C (returns taxed as per tenure). | Interest is taxable, with TDS applicable on earnings. | Premiums may qualify under Section 80C; maturity proceeds are tax-free for select policies. |
| Tenure | Fixed tenure of 15 years. | Flexible tenure depends on the mutual fund type. | Tenure ranges from 7 days to 10 years. | The policy term depends on the chosen insurance plan. |
| Liquidity | Limited liquidity with partial withdrawals allowed after 5 years. | High liquidity; can redeem units anytime (except ELSS with a 3-year lock-in). | Higher liquidity than PPF; premature withdrawal incurs penalties. | Limited liquidity; withdrawals depend on policy type and terms. |
| Risk | Low risk, government-secured. | High to moderate risk based on the fund type (equity, debt, hybrid). | Low risk, fixed returns. | The risk associated with coverage lapse or policy terms. |
| Loan Options | Loans up to 25% of the balance after 1 year. | No direct loan options, but units can be pledged for a loan. | Loans up to 90% of the deposit amount. | Loan availability depends on the policy type. |
| Ideal For | Long-term savings with tax benefits and low risk. | Investors seeking high returns and willing to take market risks. | Conservative investors prefer fixed returns and flexibility. | Individuals prioritising risk coverage along with savings. |
| Additional Notes | Cannot be closed prematurely except in special circumstances. | Best for diversification and higher returns. | Senior citizens enjoy higher interest rates. | Recommended to separate investment and insurance needs. |
Public Provident Fund (PPF) Limitations
While PPF is a reliable investment option, it has certain limitations, such as a long lock-in period and restrictions for NRIs. Before investing, it’s essential to weigh these drawbacks against its benefits. The main limitations are outlined below:
Lock-in Period
PPF includes a fully locked-in period of 15 years, which is relatively longer than other tax-advantaged vehicles-such as an ELSS scheme opening in only three years. While partial withdrawals are permitted after a few years if required, they are subject to restrictions. This factor makes PPF offices less flexible in case of emergencies or short-term financial needs.
Interest Rate not Competitive
- The rate of interest on PPF accounts is rather low compared to other similar long-term investment options. On the other hand, mutual funds like the ELSS category usually generate much higher rates of returns.
No Joint Holding
- One cannot hold a PPF account jointly, meaning that if you were thinking of holding the account with your husband or wife, or extended family, this is an least available option.
Investment Limit
- The investible limit for a PPF account is ₹1.5 lakh in a financial year. Sufficient for some and way too little for some, other options such as NPS or ELSS have higher amounts as the investment limit luxury PPF cannot boast of, but the tax benefits within 80C would invariably remain the same.
Restrictions for NRIs
- NRIs cannot open PPF accounts. However, if an Indian cultivator becomes an NRI after already setting up a PPF account, they may still contribute but will be deprived of the capability to open a fresh account or the capability to extend or renew an existing one.
Minimum Contribution Requirement
- PPF mandates a minimum annual contribution requirement for keeping the account active; failing to pay an instalment makes the account inactive. To reactivate a dormant account, one must pay fines and settle missed payments.
Conclusion
In conclusion, the Public Provident Fund (PPF) remains an excellent financial tool for long-term savings, providing individuals with guaranteed returns, tax-free benefits, and the peace of mind that comes with investing in a government-backed scheme. Whether you are looking for a safe retirement corpus, tax savings, or financial security, PPF offers a reliable platform to meet your financial goals.
For any queries, share your opinions, or any updates or information, visit Jaagruk Bharat's community page. Be a part of India’s biggest Jaagruk community.
