Public Provident Fund (PPF) – Eligibility, Benefit, Rules and Withdrawal

Public Provident Fund (PPF) was introduced in India in 1968 with the objective to mobilize tiny saving within the form of investment, as well as a return on it. It can even be known as a savings-cum-tax savings investment vehicle that enables one to build a retirement corpus whereas saving on annual taxes. Anyone searching for a secure investment choice to save taxes and earn guaranteed returns should open a PPF account.

What is Public Provident Fund (PPF)?

Public Provident Fund (PPF) scheme is a popular long-term investment option backed by the Government of India that offers protection from attractive interest rates and returns that are completely exempt from tax. Investors can avail facilities like loan, withdrawal and account expansion.

Eligibility: Who can open PPF account?

Below are the eligibility criteria to open PPF account:

1. Indian citizens are eligible to open PPF account. A person can open only one account under his name. However, another account can be opened on behalf of a minor.
2. Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not allowed to open PPF accounts.
3. A Public Provident Fund (PPF) account can be opened by a mother or father on behalf of their minor son or daughter; However both mother and father cannot open public provident fund (PPF) accounts on behalf of the same minor.
4. Grand-parent cannot open public provident fund (PPF) accounts on behalf of grand-children; However, in case of death of both father and mother, the grand-parent can open a Public Provident Fund (PPF) account as the guardian of the grand-child.

How to apply for PPF account?

PPF account can be opened in a post office under the Public Provident Fund Scheme (PPF), 1968. Some banks like State Bank of India (SBI) and ICICI Bank also offer the option of opening a PPF account. An account can be opened in branches or through online medium. Only if you have access to online internet banking, you can open PPF account online at SBI/ICICI.

Documents required to open a Public Provident Fund (PPF) account

The main documents are required to open a PPF account are:

• PPF account opening form
• Nomination form
• Passport size photo
• Copy of PAN card / Form 60-61
• Identity card and residence proof as per KYC norms of the bank.

Frequently Asked Questions

Q1. Can more than 1 Public Provident Fund (PPF) account be held by an individual?
Ans. Only one PPF account can be maintained by an individual, except the account opened on behalf of the minor.

Q2. What are the minimum and maximum amount to be invested under the Public Provident Fund (PPF) scheme?
Ans. The minimum deposit amount of Rs 500 per year and a maximum amount of Rs 1,50,000 per year.

Q3. What will be the penalty for failure to deposit any amount in one or more financial years?
Ans. If a minimum amount of Rs 500 is not deposited in a financial year, a penalty of Rs 50 per year will be imposed.

Q4. When does a public provident fund (PPF) account mature?
Ans. A Public Provident Fund (PPF) account matures after 15 years from the end of the year in which the account was opened.

Q5. Can the term of Public Provident Fund (PPF) investment be extended beyond its maturity period (15 years)?
Ans. A customer can extend the tenure of a Public Provident Fund (PPF) investment for an additional period of five years to a PPF account by submitting a Form H within one year from the date of maturity. During each block period of five years, the account holder cannot withdraw more than 60% of the balance at the commencement of each block.

Q6. Can the Public Provident Fund (PPF) account be terminated or closed before maturity?
Ans. According to the PPF Amendment Act 2016, premature payment is allowed only to the account holder or minor in the event of the account holder or his guardian, who has maintained the account for five financial years and where:

• The amount of treatment required for life-threatening diseases is required and the documents of the valid medical authority should be confirmed.
• The account holder or minor account holder is required (based on certified documents) to enter a recognised institution of higher education in India or abroad.

Q7. Can the amount be withdrawn from a Public Provident Fund (PPF) account?
An account holder can withdraw up to a maximum of 50% of the amount that is in the account at the end of the 4th year (before the year in which the amount has been withdrawn) or before the maturity period (15 years), in the seventh year after starting the account. At the end of the preceding year, whichever is less). In addition, withdrawals can be made only once in a financial year.

Q8. Is the loan facility available in Public Provident Fund (PPF)?
Ans. Yes, the loan facility available in PPF, i.e.

• Customers can avail the loan facility from the third financial year to the sixth financial year; I.e. From the third financial year until the end of the fifth financial year. But the loan amount cannot be more than 25% of the balance available in the PPF account, which is two years before the year of a loan application. For example, if a PPF account was opened in 2018-19, the first loan can only be taken from 2019-20. 
• A PPF account holder cannot take a new loan until the old loan is repaid. A loan can be taken only once a year, even if the loan taken in the year is repaid in the same year. 
• A PPF customer has to submit Form D for the loan request. The PPF interest rate is charged at the rate of 2%. And the loan taken from the PPF account has to be repaid within 36 months.

Q9. What is the procedure for transferring a Public Provident Fund (PPF) account to another bank/postoffice?
Ans. The customer has to go to the bank or post office (where he has a current PPF account) and apply for PPF account transfer.

Once the application process starts, the current bank/post office send the DD/check of the amount available in the account along with the original documents such as a certified copy of the existing bank/post office account, application opening account, nomination form, sample signature etc. to the branch applied by the customer.

Q10. Can a person who first opens a PPF account as an Indian citizen and later becomes an NRI, keep the PPF account active?
Ans. NRIs are not allowed to open or operate PPF account in India. However, if a person opens a PPF account as an Indian citizen and later becomes an NRI, then that person can keep their account active.