PPF or 15-year Public Provident Fund is one among various types of small savings schemes offered by government. A Public Provident Fund account offers a return of 8 per cent per annum at present, and the interest is compounded on an annual basis, according to India Post’s website – indiapost.gov.in. The PPF savings scheme also offers income tax benefits, such as deduction against contributions under Section 80C of the Income Tax Act (as part of the overall deduction limit of Rs. 1.5 lakh in a financial year).
Here are 10 things to know about the Public Provident Fund (PPF) account:
- Interest rate: The government reviews the interest rate applicable to 15-year Public Provident Fund (PPF) on a quarterly basis. For the quarter ending March 31, 2019, interest on PPF is paid at the rate of 8 per cent (compounded yearly) and the interest earned is tax-free, according to the post office website. (Also read: These post office savings schemes offer 8-8.7% interest)
- Maturity period: The Public Provident Fund account comes with a maturity period of 15 years.
- Extension: After completion of 15 years, the PPF account can be extended within one year of maturity for five years and so on, according to India Post.
- Minimum contribution: A PPF account can be opened at the post office against payment of Rs. 100, according to India Post. However, the subscriber is required to deposit a minimum of Rs. 500 in a financial year in the Public Provident Fund account, according to the post office website.
- Maximum investment: Investment of up to Rs. 1.5 lakh in a year is allowed in a PPF account. The deposits can be made either in lump sum or in 12 instalments.
- Premature withdrawal: One withdrawal is permissible every year from the seventh financial year, according to India Post.
- Premature closure: A premature closure is not allowed before completion of the maturity period. That means a PPF subscriber cannot close the account before completing the 15-year period.
- Income tax benefit: Investment in a PPF account qualifies for deduction from income (to arrive at taxable income) under Section 80C of the Income Tax Act.
- Nomination: The 15-year Public Provident Fund account comes with a nomination facility, which is available at the time of opening of account and also subsequently.
- Transferability: A 15-year PPF account can be transferred from one post office to another.