Public Provident Fund is a small savings scheme launched in 1968 by the National Savings Institute and the Ministry of Finance. The 15-year saving scheme was to bring the self-employed and unorganised sector employees to par with the organised sector workers. Public Provident Fund (PPF) is a long-term saving product that provides guaranteed returns and tax benefits. One of the advantages of this saving scheme is that it allows you to keep your investments secure while generating interest at competitive rates (7.1% per annum).
The scheme had two distinct objectives behind the features and benefits it offered:
PPF combines and caters to both the goals with sovereign guarantee and tax benefits of the scheme.
Key Takeaways
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Public Provident Fund Scheme (PPF) is a long-term savings scheme with good interest rates and guaranteed returns. One of the most incredible things about PPF is that the returns and interest gained through PPF are tax-free.
The scheme offers flexibility and partial withdrawal facilities to support you financially during the long investment tenure. PPF Account balance is also free from attachments under court orders.
Thus, it makes sense to invest in PPF for the self-employed, as a PPF account will ensure financial stability for the family.
| Interest Rate | 7.1% PA (from April 2020) |
| Minimum Investment Needed | Rs 500 |
| Maximum Investment Limit | Rs. 1.5 Lakh PA |
| Tax Benefit | Up to Rs. 1.5 Lakhs under section 80C |
| Tenure | 15 Years (Which can be renewed in blocks of 5 years) |
| Risk Profile | Very Safe. Offers sovereign guarantee on capital and interest |
| Maturity Amount | Depends on the Tenure of the Investment |
Public Provident Fund can provide you with many benefits. It’s crucial to understand what is PPF and how important the PPF is and to do that, we will show you the benefits of the PPF scheme.
PPF Scheme is the best option if you are looking for a long-term investment with guaranteed returns. With a very minute effort, you get the tax-saving tool, guaranteed returns, and centralized rates. This is why investing in PPF can be the best thing you can do.
The amount of loan that you can take is 25% of your PPF balance at the end of the second year. Otherwise, the balance of the year preceding the year in which you applied for the loan is considered.
You can open a PPF account at any time you want in a year. It is best to invest in this fund as it will offer a better power of compounding over the years. The account can be extended for five years multiple times after maturity. Take care of the following while starting your PPF investments:
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Now that you know what PPF is, you must know how to start your Public Provident Fund account:
Your PPF account is now open and all set. Apart from the online process, you can open your PPF account via a bank branch or Post Office as well.
For opening a PPF account offline you will need to fill out the appropriate account opening form and submit signed copies of all KYC documents.
Eligibility Criteria for Opening a PPF Account:
You can get the required forms from any bank which is authorized for PPF account opening.
The Ministry of Finance declares PPF interest rates every quarter. These interest rates are now set every quarter based on market conditions. This was implemented in the financial year 2017-2018. Let’s take a look at the quarterly interest rates since 2019.
PPF interest rates for the year 2019 were as given below:
In the year 2020, the quarterly PPF interest rates were as follows:
In the year 2024, the quarterly PPF interest rates were as follows:
Since the year 2020, the PPF interest rates have been 7.10% only and at present, it’s still the same. This interest rate is not dependent on any market. Instead, it’s set by the Central Government itself.
*Disclaimer:- The PPF Calculator provides estimates based on current interest rates, which are subject to government changes. Actual returns may vary over time. Results are for informational purposes only and do not guarantee future performance or constitute financial advice. Tax benefits and regulations may change, and calculators may not reflect the latest updates. Users should consult a financial advisor for personalized guidance before making investment decisions.
Public Provident Fund Account has a holding period of 15 years. However, you can withdraw a partial amount from your PPF account. The rules are:
You can take up a loan against your PPF balance. However, there are certain conditions and some things you must follow:-
As per the recent amendments in PPF account rules, you cannot have more than one PPF account. If you had more than one PPF account in your name both accounts will be merged into one. You can choose which account to continue after the merger.
Yes. You can write a request to reactivate your Public Provident Fund Scheme account with the bank. The fine for the inactivity of the account will be Rs. 50 per year for all inactive years. Along with that, you have to deposit a minimum of Rs. 500 for all the years in which your account has been inactive.
The minimum lock-in period in the PPF scheme is 15 years. This tenure can be extended in blocks of 5 years after reaching maturity.
No. You can choose to extend the tenure in blocks of 5 years with further contribution. Or you can choose to extend the PPF account without further contribution.
There’s no limit to that. You can extend your PPF account tenure as many times as you want. However, you can only extend it in blocks of 5 years at a time.
You can close your Public Provident Fund account only after completing the initial tenure of 15 years. To close your account, follow these steps:
After you close your PPF account, your payment will be deposited in the savings account that you have linked with your PPF account.
An individual can withdraw money from PPF after it has been in the account for a minimum of 5 years. There is no specific duration for this. You can withdraw anytime you want as long as you have waited for at least five years from the account opening date.
The withdrawal amount cannot exceed 50% of the total amount in your account or a maximum limit decided by the government every year.
Your account will be considered inactive if you don’t deposit at least Rs 500 in your Public Provident Fund account in the year. You can retrieve your inactive PPF account.
After the completion of the first 15 full financial years, your PPF account is ready for maturity and full withdrawal. After this, you can either choose to extend your PPF account with or without contributions in blocks of 5 years.
If you don’t take any action after maturity, your account will be continued without any need for further contribution. You can choose to extend the tenure up to 5 years with an annual contribution if you want to invest more in PPF.
To extend your PPF account with contribution, you need to fill out Form-H with a request to extend the tenure.
| Equity Linked Saving Scheme (ELSS) |
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Unit Liked Insurance Plans (ULIPs) |
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National Pension Scheme (NPS) |
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National Saving Certificate (NSC) |
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ULIPs and NPS accounts have been a fair competition for PPF accounts. However, PPF has been the most popular scheme due to its flexibility. We highly recommend PPF over other options available.
After maturity, the account can be kept indefinitely at the current interest rate without requiring further deposit.
Source- National Savings Institute
One of the best PPF benefits is its tax benefit. The Exempt-Exempt-Exempt (EEE) category includes PPF as one of the investment instruments. This indicates that all PPF deposits are tax-deductible under Section 80C of the Income Tax of India. It is important to remember that the maximum contribution to PPF in a single financial year can be ₹1.5 lakhs.
In addition, the total amount accumulated and the interest are tax-free at the moment of withdrawal. It is crucial to remember that a PPF account cannot be closed prior to its maturity date.
Moving a PPF account from one point of designation to another is possible. However, keep in mind that you cannot prematurely close a PPF account. The nominee is only permitted to request account closure in the event of the account holder's passing.
Both ELSS and PPF are closely related to future savings and investment planning- where ELSS is a type of mutual fund that focuses on investment in equities, also called stocks. Meanwhile, PPF is a government-guaranteed return concerned more with long-term savings.
| Features | Public Provident Fund (PPF) | Equity-Linked Savings Scheme (ELSS) |
|---|---|---|
Tenure | The lock-in period here is 15 years, which is only extendable on a block of 5 years. | ELSS comes with a lock-in period of only 3 years, which is the shortest among tax-saving instruments under Section 80C. |
Investment Limits | The minimum investment starts at ₹500 and can exceed up to ₹1.5 lakh per annum. | There is no upper limit on investment, but only up to ₹1.5 lakh qualifies for tax deduction under Section 80C. |
Returns | The government can periodically revise and determine the interest rate, which currently is at 7.1% per annum. | PPF’s market lineage leads to higher returns, but at the same time, it is also subject to high market risk compared to other tax savings instruments. |
Tax Benefits | The PPF investments are eligible for Section 80C deductions of the Income Tax, and even the interest earned and the maturity amount are tax-free. They collectively allow trippe tax saving. | ELSS investments are eligible for tax deductions under Section 80C, but the long-term capital gains are taxed at 10% if they exceed ₹1 lakh. |
The choice between the two depends solely on the expectations and risk appetite of the policyholder. Moreover, the time frame plays an essential role, along with the tax benefits. Therefore, choose wisely!
Even though PPF is popular and pretty lucrative, there are some common assumptions that have been associated with it. Here is an overview of what these misconceptions are and how they can change your perspective on whether you should or should not invest in them.
Risk Factor: Some believe PPF is entirely risk-free. Now, although it is backed by the government, its interest rates are subject to change every quarter, which means that its returns can differ from what you may expect.
Returns Comparison: It's a common myth that ELSS always offer you higher returns compared to PPF. However, ELSS has its market linkage, which, in fact, carries a higher risk.
Liquidity: The concept of a long-term savings instrument with a fixed tenure of 15 years that has a partial withdrawal option under specific conditions after a certain period. Therefore, the liquidity is limited, which means you cannot access the entire amount at will.
PPF, or Public Provident Fund, offers financial security and long-term planning for its users, weaving a narrative of stability and growth over time. With a minimum investment, you can begin to sow the seeds of a prosperous tomorrow.
As the maturity period approaches, you will realise that this disciplined investment has transformed into a substantial corpus, ready to support your dreams—be it a home, education, or retirement. The PPF nurtures their financial aspirations and instils a sense of responsibility and foresight. By choosing to invest in the PPF, you get a long-lasting financial foundation, illustrating how small, consistent efforts can lead to significant rewards over time.
As per the recent amendments to PPF account rules, you cannot have more than one PPF account. If you have more than one PPF account in your name, both accounts will be merged into one. You can choose which account to continue after the merger.
Yes. You can write a request to reactivate your Public Provident Fund Scheme account with the bank. The fine for the inactivity of the account will be ₹50 per year for all inactive years. Along with that, you have to deposit a minimum of ₹500 for all the years in which your account has been inactive.
The minimum lock-in period in the PPF scheme is 15 years. This tenure can be extended in blocks of 5 years after reaching maturity.
No. You can choose to extend the tenure in blocks of 5 years with further contributions, or you can choose to extend the PPF account without further contributions.
There’s no limit to that. You can extend your PPF account tenure as many times as you want. However, you can only extend it in blocks of 5 years at a time.
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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