Public Provident Fund (PPF): Full Form, Meaning, Interest Rate, & Investment Guide

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PPF Stands for Public Provident Fund (PPF), It was launched in 1968 as an investment plan favoured by those seeking consistent, higher returns. Safeguarding the principal amount is the special focus for PPF account holders. Once initiated, the PPF account becomes the dedicated space for monthly deposits and compounded interest, ensuring a secure and rewarding financial journey in the future.

This blog will discuss what is PPF, how it works, interest rates, features, benefits, investment and withdrawal process.

What is PPF?

PPF is a long-term investment scheme backed by the Government of India, presents a unique blend of tax savings, secure returns, and a reliable investment avenue.

It shields the financial needs of the masses in India, providing stability as market fluctuations do not influence it.

When you open a PPF account, your deposits remain safe. Every month, you add more money, and the interest grows on the total amount, making your savings grow over time. During economic downturns, PPF accounts offer consistent annual returns. PPF is a long-term investment scheme for individuals seeking secure yet high returns.

What is the Interest Rate on PPF in 2024?

The current PPF interest rate is 7.1% per annum, compounded annually. The Finance Ministry determines this rate annually, with the interest credited on 31st March. It is calculated on the lowest balance between the fifth day's close and the month's end, with the interest increasing over time. For a precise estimate of your returns, consider using a PPF Calculator, as it allows you to project the outcomes based on your investment amount in a PPF account.

How Does the PPF Account Work?

A Public Provident Fund scheme is a versatile financial tool with a 15-year tenure, allowing adults to open accounts for themselves or minors. During this period, you can deposit amounts ranging from Rs.500 to Rs.1.5 lakh per financial year, either in a lump sum or instalments.

These deposits are tax-exempt under Section 80C. The PPF account requires a minimum annual deposit of Rs.500 to stay active; otherwise, the account will be deactivated. You can reopen the account by paying a penalty of Rs 50 for non-compliance, along with Rs. 500 for the reactivation.

With an attractive 7.1% p.a. interest rate, compounded annually, your savings grow. The account permits loans and partial/premature withdrawals under specific conditions. After 15 years, you can extend the account, contribute more, close it, or enjoy your matured investment.

Also Read: What is IFSC Code & MICR Code? Branch Codes Details

Features & Benefits of Investing in a PPF Account

Flexible Tenure: PPF offers a minimum tenure of 15 years, extendable in 5-year blocks according to your preference.
Investment Limits: You can contribute between Rs. 500 and Rs. 1.5 lakh annually, either in lump sums or up to 12 instalments.
Opening Balance: A PPF account starts with a modest monthly opening balance of just Rs. 100. However, investments beyond Rs. 1.5 lakh annually won't accrue interest.
Deposit Frequency: Regular deposits are required at least once yearly throughout the 15-year tenure.
Versatile Deposit Modes: Contributions can be made through cash, cheque, demand draft (DD), or online fund transfer, offering convenience.
Nomination: PPF account holders can designate a nominee at the time of account opening or later.
Risk-Free Investment: With government backing, PPF ensures guaranteed, risk-free returns, providing a stable element in an investor's portfolio.
Tax Benefit: PPF interest and maturity amounts enjoy tax exemptions under section 80C of the Income Tax Act, 1961.
Partial Withdrawals: Investors can make partial withdrawals from the seventh financial year, enhancing liquidity.

Documents Required for Opening a PPF Account -

Here are the documents you will need to submit when opening a PPF account online:

Complete the application form
Provide KYC documents (Aadhaar, Voters ID, Driving licence, etc.)
Furnish residential address proof
Submit the nominee declaration form
Attach a passport-size photograph

How to Withdraw Savings Funds from the Public Provident Fund?

PPF allows complete withdrawal after 15 years, including the principal and accrued interest. However, if needed earlier, partial withdrawals are permitted from the 7th year onward, limited to 50% of the balance at the end of the 4th year. It can only be done once per financial year.

Withdrawal Process of Pulic Provident Fund

Obtain the withdrawal form (Form C) from the bank where the PPF account is held.
Fill in the application form with the necessary details.
Submit the completed form to the bank where the PPF account is maintained.

Also Read: What is MMID?

FAQs About Public Provident Fund

1.) Can I increase my PPF account funds after the maturity period?

No, once the PPF account matures after 15 years, you can withdraw the balance but not contribute further.

2.) Is the interest easily earned on the PPF account?

Yes, the interest on a PPF account is earned automatically and is compounded annually.

3.) Is PPF a good investment option?

Yes, PPF is considered a secure and attractive long-term investment option with guaranteed returns.

4.) Can I open a PPF account for my Wife?

Yes, you can open a PPF account for your wife, providing her with the same benefits.

5.) How many times can I deposit in PPF in a month?

You can deposit in PPF as a lump sum or in a maximum of 12 instalments within a financial year.

6.) What is the minimum lock-in period for a PPF investment?

The lock-in period for a PPF investment is 15 years, with partial withdrawals allowed from the 7th year.

7.) Can I open a joint PPF savings account?

No, PPF accounts can only be held in the name of one individual. Joint accounts are not allowed.

PPF: PPF Full Form, Meaning & Interest Rate Explained