Written by : Knowledge Centre Team
2026-01-07
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6 minutes read
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The PPF Act of 1968 introduced a government-run savings scheme known as the Public Provident Fund (PPF). In a word, the Public Provident Fund is a long-term, modest savings scheme for the public sector. It was established to provide financial security to unorganised sector employees and self-employed people.
It's a high-return choice with a competitive interest rate and returns on capital. Under the Income Tax Act, the interests and returns earned aren't taxable. This plan necessitates the creation of a PPF account, with the amount contributed during the year being claimed as a deduction under section 80C. Let’s move forward to understand PPF accounts better.
Key Takeaways
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What are the 7 Questions to Ask while Considering Opening a PPF Account?
Investing in a savings plan or scheme is one of the crucial financial decisions. Having a significant amount of savings can help you protect your loved ones during rainy days. Given the degree of necessity for saving, the Government of India has various savings schemes to boost your savings game. Public Provident Fund is one such savings scheme by the Government that can help you build your retirement corpus.
Here are 7 questions you should ask yourself before opening a PPF account:
- How to Open a PPF Account? You are only permitted to have one PPF online or offline account in your name at any one time throughout your lifetime. You can also open an account in the name of a minor or anyone you have parental or legal authority over. However, you must note that it will be the account of the child, and you will be the caretaker. Opening a shared account is not permissible.
You can open an account at a postal service or a certain nationalised bank. Fill out the form, upload a photo, and mention your PAN number, and you're good to go. Following the completion of your requirements, you will be given a passbook that will record all of your Public Provident Fund transactions. - Can Minors Open a PPF Account? An underage person cannot open a PPF account, although an adult can do it on their child's behalf as a guardian. A payment limit is determined if the guardian has a secondary PPF account as well as one in the child's name. In any of the accounts, the guardians cannot invest more than ₹1.5 lakh per year.
- Is It Possible for an NRI to Create a PPF Account? Non-resident Indians are not permitted to create a PPF account, according to a rule enacted on July 25, 2003. Being a resident of India is a requirement for opening a PPF account. A PPF account cannot be opened by a non-resident Indian. However, if an NRI had a PPF account while staying in India, he might keep it. NRIs, on the other hand, are not permitted to open new PPF accounts.
- What is the Interest Calculation of PPF? The current interest rate on a PPF account is roughly 7.1%. In the case of a monthly contribution, interest is charged on the account's minimum balance from the 5th through the end of each month. In the event of an annual contribution, interest is calculated on a yearly basis on March 31st, i.e. when the fiscal year ends.
- Is Tax Exemption Available on PPF? In terms of income tax implications, PPF falls within the EEE (Exempt-Exempt-Exempt) group. This means that up to ₹1.5 lakh in PPF contributions can be deducted under Section 80C of the Income Tax Act. Second, both the interest generated on the principal amount and the maturity amount are tax-free. As a result, this may be a sufficient reason for people to choose PPF.
- What happens when you don’t make contributions to PPF accounts? An investor must make an annual investment of at least ₹500. In a given year, a limit of ₹1.5 lakh can be placed in a PPF account. If the investor does not make the required annual contribution, the account will become dormant. To reactivate the account, submit a written request accompanied by a ₹50 fine for every year the account has been dormant.
- Can I Extend the Tenure of my PPF Account? After completing their 15-year tenure, PPF account holders can prolong their tenure in blocks of 5 years. For the prolongation, the account holder must submit a completed Form H to the bank or post office. The interest rate for the extended term has not changed, and the amenities have not changed. The PPF scheme is one of the best tax-saving plans in India.
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What are the Four Benefits of the Public Provident Fund?
PPF is not just an investment or a financial tool that helps you accumulate wealth. It has more benefits to it as well. Some of them are as follows:
- The interest rate is assured but not defined: The PPF interest rate is not set but is tied to the return on 10-year government bonds. The value does not fluctuate every day but is set at the start of each quarter, given the average government bond over the previous three months.
- Prolonged tenure: The PPF interest rate is not fixed, but it is linked to the 10-year government bond return. The value is established at the start of each quarter, based on the average government bond for the previous three months, rather than fluctuating day to day.
- Extending with a contribution: If you want to keep the money and pay it back, you must register at a Post Office or a bank well before the one-year period ends. The account will then be renewed for another five years.
- Extending without contribution: If you do not tell the banking institution or the Postal Service, the account will automatically renew. It will not, however, accept donations. The money earns interest on a regular basis, and you may only take it out once a year.
What is the Alternative to PPF?
Alternatively, you can also choose ULIP or iSelect Guaranteed Future Plus by Canara HSBC Life Insurance. These are savings plans that offer life cover along with an avenue for savings. Unlike PPF, they are more flexible and can be customised to suit your financial goals. You also gain from potential market-linked returns or guaranteed maturity values.
You can choose a plan as per your retirement corpus and start your financial planning today
Conclusion
The Public Provident Fund remains one of India’s most reliable long-term savings schemes, backed by government assurance and tax benefits. While its conservative nature appeals to risk-averse investors, it is important to ask the right questions before opening an account to understand its workings. From eligibility rules and contribution limits to interest calculation and tax exemptions, every detail plays a role in making your investment more fruitful.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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