Public Provident Fund

September 9, 2025 by Team Instabizfilings

Introduction to PPF

Public Provident Fund (PPF) is a long-term savings and investment scheme launched by the Government of India in 1968 under the Public Provident Fund Act. It was aimed at promoting small savings at acceptable rates of returns along with income tax advantages. Managed by the National Savings Institute, PPF is one of the safest and most tax-efficient investment options for Indian residents.

Key Features of PPF

Feature	Details
Interest Rate	Decided by the Government quarterly. As of Q2 FY 2025-26, it is 7.1% per annum (compounded annually).
Tenure	15 years (we can extend it to 5 years).
Minimum Deposit	₹500 per financial year.
Maximum Deposit	₹1.5 lakh per financial year.
Deposit Frequency	May be in a lump sum or in as many as 12 instalments a year.
Mode of Deposit	Cash, cheque, demand draft, online transfer (through banks or India Post).
Loan Facility	Available between the 3rd and 6th years.
Partial Withdrawal	Allowed from the 7th year onwards.
Account Extension	May be lengthened by periods of 5 years with or without contribution.

Benefits of PPF

Tax Benefits – Offers triple tax exemption under Section 80C:

The deduction of investment under 1.5 lakh is eligible for tax deduction.
Interest earned is tax-free.
Maturity proceeds are also tax-free.

Safe and Secure : Backed by the Government of India; zero risk of capital loss.
Compounding Advantage : Annual compounding helps in building a large corpus over time.
Flexibility in Deposits : Flexibility to deposit monthly or yearly.
Suitable for All Age Groups : Ideal for salaried individuals, self-employed, retirees, and even minors (through guardians).

Eligibility Criteria

Only the Resident Indians can open a PPF account.
Minors can also have an account through their guardian.
NRIs are not allowed to open a new PPF account, but if they already had one before changing residency, it can be maintained till maturity (without extension).

How to Open a PPF Account

You can open a PPF account at:

Post Offices
Authorised Banks (SBI, HDFC, ICICI, Axis Bank, etc.)
Online via net banking (if your bank offers the facility)

Documents Required:

Identity Proof (Aadhar Card, PAN Card)
Address Proof
Photograph
Initial deposit amount (cheque/cash)
PPF account opening form (Form A)

Loan and Withdrawal Facility

Loan:

Accessible from 3rd to the 6th financial year.
Max amount: 25% of the balance at the end of 2nd year preceding the loan application year.
Interest rate: 1 percentage point above the interest rate of PPF.

Partial Withdrawals:

From the 7th year.
Maximum withdrawal: 50% of the balance at the end of the 4th year or the immediate preceding year, whichever is lower.

Maturity and Extension

After 15 years, the account can either be closed or extended in blocks of 5 years.
You may lengthen or not with more contributions.
Otherwise, in case you do not contribute, the balance on account will gain interest.

Tax Implications (EEE Status)

PPF enjoys Exempt-Exempt-Exempt (EEE) tax status:

Exempt from investment (Section 80C deduction),
Exempt from interest earned,
Exempt on the maturity amount.

Who Should Invest in PPF?

Conservative investors are looking for guaranteed returns.
Individuals seeking tax-saving instruments under Section 80C.
Parents planning for long-term goals like children's education/marriage.
Retirees or those near retirement want a secure investment.

PPF vs Other Investment Options

Criteria	PPF	Fixed Deposit	ELSS	NPS
Risk	Low	Low	Medium to High	Low to Medium
Returns	Moderate (7-8%)	Low to Moderate	High (Market-linked)	Moderate
Tax Benefit	80C + Tax-free returns	80C (only in 5-year FD)	80C	80C + additional ₹50,000 under 80CCD(1B)
Lock-in Period	15 years	5 years	3 years	Till retirement

Important Points to Remember

There is no deposit penalty (can be reactivated); the account is marked as inactive with a lack of at least 500 rupees in the account in a year.
PPF accounts are not permitted.
It is not permitted to park two or more PPF accounts using your name.
There is no possibility of closing the account before maturity except under special circumstances (e.g. grave illness, tertiary education).

Conclusion

Public Provident Fund is an iron-clad and secure instrument of investment by a person who is after a secure yield with tax benefits. It also teaches self-discipline on how savings are handled as well as how a large amount of corpus is created in anticipation of the future. PPF is a good investment option whether you are saving towards your retirement, your child's education or simply seeking tax-saving instruments.

Disclaimer

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