PPF is money that will be yours forever.
Knowledge of the different features of the PPF account will help you when you want to take a loan against the account, withdraw from the account, re-activate a discontinued account etc.
Here an attempt is made to introduce you all features of PPF.
What is PPF?
Public Provident Fund (PPF) is a scheme of the Central Government, framed under the PPF Act of 1968. Briefly, PPF is a government backed, long-term small savings scheme which was initially started by the Government in order to provide retirement security to self-employed individuals and workers in the unorganized sector. Today the PPF is the Indian citizens’ darling investment avenue.
But keep in mind, you need to be disciplined to make the most of the PPF investments, and also meet your liquidity needs elsewhere; because under this investment avenue your money is blocked for 15 years.
Main Features
| Eligibility | You need to be a Resident Indian Individual |
| Entry Age | No age is specified
(Minor is allowed through guardian)
|
| Interest rate | 8.70% p.a. compounded annually* |
| Tenure | 15 complete financial years
plus the first year of investment means total your fund will get blocked for minimum 16 years
|
| Extension in tenure | On completion of 15 years, the account can be extended in a block of 5 years. However there is no restriction on no. of extension an invester can availed. |
| Minimum Investment | Rs 500 p.a. |
| Maximum Investment | Rs 1,50,000 p.a. |
| Limit over no of deposits in a financial year | A maximum of 12 deposits allowed in a financial year |
| Tax Benefit | Up to Rs 1,50,000 under Section 80C; |
| Interest exemption under EEE model | Interest earned is exempt from tax and so are the maturity proceeds |
| Can be opened at | Any Post Office and
Authorized branches of Banks
|
| Who cannot invest | Hindu Undivided Family (HUF’s);
Non Resident Indian’s (NRI’s); and
Person of Foreign Origin
|
| Mode of Payment | Cash
Crossed Cheque
Demand Draft
Pay Order
Online Transfer in favour of the Accounts Officer
|
| Nomination | Nomination facility is available |
| Interest rate | Declared annually.
The interest rate is currently 8.70% p.a.- This is subject to change.
|
Change in interest rates over year
PPF interest rate has steadily dropped over the years, and can be expected to slowly fall as the years proceed. Here’s a look at what rates used to be:
| Period | Interest Rate p.a. |
| 01 April 1986 – 14 Jan 2000 | 12% |
| 15 Jan 2000 – 28 Feb 2001 | 11% |
| 01 March 2001 – 28 Feb 2002 | 9.50% |
| 01 March 2002 – 28 Feb 2003 | 9.00% |
| 01 March 2003 – 30 Nov 2011 | 8.00% |
| 01 Dec 2011 – 31 March 2012 | 8.60% |
| 01 April 2012 – 31 March 2013 | 8.80% |
| 01 April 2013 – till date | 8.70% |
It is noteworthy that the interest rate on PPF is benchmarked against the 10-year G-Sec yield and is usually 0.25% higher than the average yield on G-Secs. The interest rates on PPF are announced every year by the Reserve Bank of India (RBI) for the upcoming financial year.
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