In this week’s blog, we will be discussing one of the most eminent investing avenues in India– the Public Provident Fund. This government scheme has been around for a very long time, and with its enormous tax benefits and assured returns, it has stood the test of time.

What is PPF?

The Public Provident Fund (PPF) is a small savings scheme offered by the central government. PPF came into force on 1st July 1968. The account is backed by the government of India and is entirely risk-free with guaranteed returns. Additionally, any amount in your PPF account cannot be attached under any order or decree of any court for any debt or liability incurred by you.

Features & Returns

Any resident Indian can open a PPF account. There is no provision for joint accounts; however, you can open an account in your child’s name. There are no age limits specified for the scheme, and the plan has an initial maturity of 15 complete financial years from the end of the FY in which the account was opened. You can open a PPF account with a minimum contribution of Rs. 500.

The maximum limit of investments in an FY is 1.5 Lakhs. This limit includes the deposits made in your account and any accounts opened on behalf of your child. If you deposit more than 1.5 lakhs, the same will not earn any interest.

For the rest of the scheme’s tenure, you can either contribute to the PPF account in instalments or lump sum, in the multiples of Rs. 50 (minimum Rs. 500 in an FY) subject to the maximum limit. On failure to contribute the minimum amount to PPF, the account will be discontinued.

What happens in case your account is discontinued? In case of a discontinued account, you can revive the same on payment of a fee of fifty rupees along with all the arrears of the minimum deposit of Rs. 500 for each year of default.

While writing this blog, the current interest rate for the scheme stands at 7.1 % per annum. The interest is compounded annually and credited to your PPF account at the end of the financial year.

A critical point on interest calculation in PPF– although the interest is credited at the end of the FY, it is calculated monthly on the minimum balance between the 5th and the last day of the month. Hence, to avail the maximum benefit on your PPF contributions, make sure to deposit before the 5th of every month if you contribute monthly to the scheme. PPF interest rates are aligned with G-sec of similar maturity, with a spread of 0.25 per cent and reviewed by the government every quarter.

How to open a PPF account?

You can open a PPF account at any head post offices, general post offices, or branches of India's nationalised and authorised private sector banks. You’ll need to fill up an account opening form, submit your photographs, and provide Aadhaar card details. In addition to this, your address and identity proof documents will be sought and be sure to carry original identity proof. You can also choose a nominee at the time of account opening.

Apart from physically visiting the post office or the bank branch, you can also open a PPF account online. Many banks also offer online account opening facilities for existing customers. Hence, if you are an existing account holder with any bank offering PPF, you can easily visit the bank’s website or the mobile application to open the account seamlessly and without additional KYC verification.

Please stay tuned for the next week’s blog, where we will cover the tax benefits of PPF and why you should open a PPF account.

If you have a question, share it in the comments below or DM us or call us - +91 9051052222. We'll be happy to answer it.

- Nischay Avichal