Wondering what is PPF?
Full form of PPF is Public Provident Fund.
It is a small saving and tax benefit scheme of Government of India.
It provides for long term saving for future benefits.
Google provides the following meaning of‘provident’.
The amount is deposited each year and the maturity period is 15 years.
The minimum amount can be invested in a year is Rs. 500 and Maximum is Rs. 1,50,000/-.
The interest rates on PPF may change each year by Ministry of Finance. The current rates are 8.70% per annum compounded annually.
The amount invested each year is allowed for tax deduction under section 80C of Income Tax Act, 1961.
Partial withdrawal and loan facility is available.
Nomination is allowed in PPF account.
So if a person invests Rs. 1,50,000 each year for 15 years he may receive Rs. 46,75,910/- if the same interest rate (8.70% p.a) is maintained by the government.
Hence for the total amount invested of Rs. 22,50,000 , the benefit is of Rs. 24,25,910/-.
Hope you have got the answer for ‘What is PPF?’
How to Open PPF Account?
PPF account can be opened with any authorized bank or Indian Post office.
Only Indian resident can open PPF account.
PPF in joint names is not allowed and only one person can have one PPF account.
You need to fill Form A as PPF application and attach you ID and Address proof.
You need to submit the form with the bank.
You can also open PPF account online.
Various banks like ICICI provides the facility for online PPF account.
What are the benefits of PPF account?
- High interest rates as compare to other small saving schemes.
- Tax deduction of Rs. 1,50,000 per year.
- Interest and the Maturity amount is tax free.
- It is risk free investment.
- It is not attached to any court decree or claims of creditors.
- The subscriber can extend the period in a block of 5 years each time.
What is PPF calculator
There are various website providing for PPF Calculator.
You can also calculate the PPF amount based on compounded interest formula.
A = P(1+R/N)^NT
Where A is maturity amount to be received.
P is the amount to be invested each year.
R is the rate of interest.
N is the number of times interest is compounded here it is 1.
How to withdraw amount from PPF account?
Withdrawal can be made from the expiry of 5 years from the end of first year in which first subscription was made.
So if you have made the first subscription in the first subscription was made.
So if you have made the first subscription in the first year, then you can withdraw from end of 6th financial year i.e 7th year onwards in Form C.
The amount can be withdrawn only once in a year.
Only 50% of the amount standing at the end of 4th year (first year of subscription plus Four more financial years) or amount standing at the end of previous year, whichever is lower can be withdrawn.
For example, is a person has Rs. 3,00,000 at the end of 4th year in his account and Rs. 5,15,000 at the end of 9th year in his account. Then in the 10th year he can make a withdrawal of Rs. 1,50,000 only.
How to obtain Loan from PPF Account?
Loan can be obtained from the expiry of 3rd year from the end of first financial year in which first subscription was made.
Limit on loan amount is 25% of the amount standing at the end of 2nd year.
Download here the Form D for PPF Loan
I have tried to explain all main concepts related to ‘what is PPF‘. If you still have any query, please comment.
Latest posts by CA Harish Negi (see all)
- How to invest in shares online: Stock Market trading Simplified - January 12, 2017
- Basic PF Deduction Rules and EPF, EPS, EDLIS Rates - January 12, 2017
- Payment of Bonus Act: Applicability, Calculation & Amendments - January 1, 2017