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We have heard a lot about PPF. Many of us have PPF accounts. But the question is, ‘do we know everything {29th June 2016} 7th Pay Commission
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about PPF?’ Some of us may know but for many of us, the investment areas always kind of remain hazy. This
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haziness comes from the fact that most of the investment instruments are described using jargon and are too
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lengthy and boring to read. In this article, we will try to take those factors out of the equation and try to explain
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everything about PPF in the simplest possible language that everyone can understand. The primary aim of
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this article will be to ensure that by the time you complete reading this article, you should be fully aware of Rs 10 in MP
what PPF really is and how it can help you (or perhaps, not help you). We are ready when you are. Need to Apply Bhamashah Yojana Card Online
grab a coffee? Grab it! It will take a while to complete reading this article. in the state of Rajasthan
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PPF or Public Provident Fund is an old fellow. Pretty old. The concept was conceived and given shape by the
Internet in Goa
Government of India back in 1968. This means that PPF has been in business for 49 years now and next
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year, i.e. in 2017, it will turn 50 years old. Yojana (PMAY) Urban and Gramin
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It is widely accepted that the longer a financial product stays in business, the safer and more trustworthy it Biju Kanya Ratna Yojana Scheme in
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gets. So, PPF or Public Provident Fund is something you can really count on. 49 years is something that
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cannot be taken lightly and PPF is going to stay around for many more years to come.
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Now the question is, ‘what was the purpose of launching PPF?’ Good question! We all know that post
CM Santwana Harish Scheme Yojana
independence, India, which was 2nd richest country in this world (1st was China) in terms of global trade,
in Karnataka
became one of the poorest countries in world because of British Imperialistic exploitations. People really didn’t
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have ample money and the whole economy was struggling to get out of the terrible condition. So, it was
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important to encourage savings among people. Stashed in Demonetized Notes
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PPF was created as a tool for this massive task. The Ministry of Finance of the then ruling government said, (Gurgaon, Name Changed)
investing in PPF will give the following benefits: Digital Transactions Discount on
Insurance, Petrol and Diesel
Direct Transfer of Fertilizer Subsidy
Document required for opening account
under Jan Dhan Yojana
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Hindi and English
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Yojana
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Change | Transfer | Exemptions | Lock
In Period
Whatever money is invested into PPF account will become taxfree. This means that if a person earns, Equalization Levy Meaning – Google
Tax | Meaning | Start date | Impact |
say INR 500 and deposits INR 100 in PPF account, INR 100 will not be taxed under income tax
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deductions. Only INR 400 will become taxable. So, this means that people had to pay less income tax.
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Again, interests that would be earned by PPF deposits will not be taxed. This means that if a person
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deposited INR 100 and earned an interest of say INR 9 (assuming that interest rate was 9%), the
in AP (Andhra Pradesh)
person will enjoy that INR 9 as taxfree earning. No taxes will be applied on the earned interest.
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Saving in PPF account will create a corpus of money that will eventually work as a retirement security.
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This means that a person will have a lump sum amount of money in hand when he or she retires. This Delivery | Buy | Payment Link | Email |
lump sum money will help the person to maintain a moderate and decent lifestyle postretirement even Next Booking Dates
when the monthly income earnings stop. Gold Jewellery Holding Legal Limits |
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From taxation aspect, yes, Public Provident Fund became the most effective taxsaving instrument. That was Good and Services Tax (GST Bill
the whole purpose of introducing PPF in market. Meaning Hindi / Eng) | Benefits |
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A Bit About PPF Accounts Google’s Bharat Saves With Jan Dhan
Yojana for financial planning
Anyone who earns can create a PPF account and deposit money. However, there are limitations to the Green Urban Transport Scheme
(GUTS)
amount that can be deposited and for the amount of time such deposits can be made. The interest rate that
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is offered on PPF deposits changes every financial year. This rate is announced by the government. This
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interest rate can fluctuate from year to year. It can increase or it can decrease. For instance, the interest rate
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on PPF investments for fiscal year 20152016 was 8.7% and this has been reduced for 8.1 for the current
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fiscal year, i.e. 20162017.
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Please remember that when we are referring to interest rates, we are actually referring to yearly interests. Holiday List for Central Government
That is, interest that can be earned in one year. Employees during year 2017 in India
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So, if a person deposits just INR 100 in one year, the total interest he or she can earn in the current fiscal Phone | Delivery Date | Site Not
year (20162017) is INR 8.10. That is the yearly earning! Opening
How To Contact PMJDY Team
Opening PPF Account How to find CSC (Common Services
Centers) in your city
In case you are willing to open a PPF account, you have to do so through a bank or a post office. There are How to keep an account opened
no other options left. Which banks to approach? Well, you can approach any nationalized bank in the area functional
you live. In case you are looking for a private sector bank, you need to first check whether the bank has How to open a Jan Dhan Yojana
authorization or not. If a bank or any of its branch has an authorization for opening PPF accounts for its Account
customers, you can approach the bank. Post offices are all nationalized and hence, you can simply approach How to open account in Jan Dhan
the post office in your area and open a PPF account. Yojna for a minor person?
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In order to open a PPF account, you need to fill up an account opening form and also submit the necessary
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documents that the bank or post office asks for. While opening an account, you will also have to deposit the
Jan Dhan Yojana
minimum allowed deposit amount. Once you do that, the PPF account will be opened and you can operate it
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as required.
and Fares
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However, you need to remember one thing. Just like the interest rate is not fixed and can change every year, and benefits.
the maximum yearly investment allowed in a PPF account can also change over time. The maximum allowed Janani Suraksha Yojana (JSY)
investment is also announced by the government. Jio 4G Smartphone at Rs 1000 with
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Date Calculations in PPF Accounts Kanya Vidya Dhan Yojana
Kempegowda Layout – Allotment of
Because PPF is a financial product, it always follows the fiscal year and not the calendar year. The fiscal year
Residential sites by BDA – Details &
is calculated from 1st of April every year to 31st of March next year. This means that the current fiscal year Eligibility Conditions | BDA application
20162017 started on April 1, 2016 and will end on March 31, 2017. status
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Going by this calendar, if you are opening an account in say, December, 2016, the first year of the account With Low Investment Hindi
will be completed on March 31, 2017. However, if you are opening your account on say April 1, 2017, the first List of Banks authorized to open
accounts in Jan Dhan Yojana Scheme
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12/22/2016 PPF Account | Interest Rate | Tax Benefits | Withdrawal | Age Limit PM Jan Dhan Yojana
year for the account will be completed on March 31, 2018. In the first scenario, you will earn interest only for List of Bigg Boss 10 Probable
4 months while in the second scenario, you will earn interest for a whole year. contestants and Episode Updates
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Benefits and Features of PPF or Public Provident Fund Lucky Grahak Yojana and Digidhan
Vyapar Yojana for Cashless
This is definitely one of the most important sections that you have been eyeing on, right? Well, in that case, Transactions
let us waste time no further and begin. Maha Wallet Application Maharashtra
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Public Provident Fund comes with a number of advantages that include tax benefits, interest earnings and of Mahatma Jyotiba Phule Jeevandayeeni
course retirement security. However, one of the biggest advantage of PPF is its pocketfriendly nature. Unlike Yojana Maharashtra (cashless
treatment of the poor)
many other financial products on market, the PPF comes with two big advantages:
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It is backed by Government of India and hence it is extremely secure.
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The minimum deposit allowed under PPF is very low, making it a very good investment avenue for
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people belonging to very low income groups as well.
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Now that we know the basic advantages, let us take a quick look at the features of PPF in a tabular format.
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We prefer a table over bullet points because it helps to get a quick grasp over things. Yojana
Mudra Bank Loan Yojana (PMMY)
Features Details Details| Apply, Documents Required,
Banks, Interest rates
Any nationalized bank and its authorized branches. Mukhya Mantri Shikshak Samman
Account opening at Any authorized private bank and its authorized Yojana in Himachal Pradesh | Opening
branches. Post office. of Aadharsh Vidyalaya
New Form 12BB for LTA, HRA and
Tenure of PPF account 15 years. Home Loan Interest Proofs to be
furnished to Claim Tax Rebate
Changes every year. Interest rate is announced by
NITISH’S Saat Nischay (resolves)
the government at the beginning of each financial Scheme Yojana in Bihar
Interest rates applicable on deposits year. For the current financial year (20162017), it is Odd Even Scheme Delhi Details | Hindi
8.1% yearly. Interest earnings are calculated as | Rules | Exemptions | Formula PDF
compounded growth. Pahal DBTL (LPG Subsidy) Yojana
Panjabrao Deshmukh Scheme Interest
Minimum deposit for account opening INR 100.
Subsidy in Maharashtra
completed. Rewards
Pradhan Mantri Suraksha Bandhan
All interests that are earned by the deposits in PPF Yojana – PMSBY
account are free of any tax obligations. In other Pradhan Mantri Surakshit Matritva
words, they are fully taxfree. Additionally, whatever Yojana Details| Benefits |Eligibility
amount is first deducted from the total yearly income Pradhan Mantri Yuva Yojana (PMYY)
before applying income taxes. Procedure of New Form15G and 15H
Online Submission
The account holder can opt for a nominee to the PV Sindhu biography in Hindi /Eng | PV
PPF investments. The nominee can be selected Sindhu Wins Silver medal at Rio
Nomination options Olympics 2016
either during opening the account or any time after
opening the account. RuPay card in Jan Dhan Yojna
Joint Account options PPF has no provision for joint account.
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12/22/2016 PPF Account | Interest Rate | Tax Benefits | Withdrawal | Age Limit PM Jan Dhan Yojana
Sagar Mala Yojana of the Indian
One can wish to continue the PPF account after government
completion of the tenure. There is a condition. The Samajwadi Namak Yojana in UP
Renewal options available renewal or extension is allowed for a period of 5 Samajwadi Shravan Yatra Scheme and
years. Extension for less than that or more than that List in UP
is not allowed. Sauchalay Nirman Gharka Samman
Yojana Scheme
It is absolutely not possible to transfer PPF funds Sauni Yojana ( Saurashtra Narmada
from one person’s account to another person’s Avtaran Irrigation)
Fund transfer facility on PPF account. However, one person can transfer funds Saur Sujala Yojana Scheme
from one bank to another bank or to a post office in Scholarship/Fellowship Schemes for
an account of his own. This transfer is free. Women
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One can opt to take out a loan against PPF account. and Kashmir Scheme
This is allowed only from 3rd year and not allowed Senior Citizen Saving Scheme (SCSS)
after 6th year. Loans can be taken out multiple times [Post Office and SBI]
Loan facility on PPF
but one has to make sure that the previous loan is Small Account or Chota Khata PMJDY
paid in full for the next application to be accepted solarrooftop.gov.in | Solar Rooftop
and granted. Subsidy Scheme Yojana – Apply Online
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Are There Any Benefits of Investing in PPF Account?
How to Apply
Sukanya Samriddhi Yojana | Hindi | SBI
Of course there are benefits attached to PPF accounts and these benefits are really interesting. Let us take a
| Eligibility
quick look at the benefits that can be enjoyed by investing in Public Provident Fund.
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1. One of the greatest advantage is that PPF investments are completely safe because they are backed
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by the government. However, in case of complete economic meltdown (something of the type of Great
Aarogyam Schemes in Andhra Pradesh
Depression of 1930s), this safety no longer exists.
Swasth Kutumb Yojana
2. Tax benefits are definitely one of the highlights of PPF accounts. Withdrawals and interest earnings
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under Public Provident Fund are taxfree and all investments (inflow) are taxdeductible or simply put, Itinerary
investments are also free of income taxes under section 80C. Types of account to open under Jan
3. This investment avenue is perfect if investment goals are long term because PPF comes with a 7year Dhan Yojana
lockin period. UDAAN Yojana – Cheap Airfare
4. Those who want to ensure financial security after retirement, PPF is brilliant because all interest Scheme by Indian Govt
earnings are calculated a compounded rate. This means that by the time the PPF account matures, Ujala Yojana| Free LED Bulb Scheme
the final corpus grows significantly. Unified Payments Interface (UPI) | Apps
5. PPF accounts are easy to open. They can be opened from any nationalized bank or private bank | Process to Pay
(authorized banks in private sector). For tech savvy people, online opening of accounts is also Vehicle Swap Scheme
possible. Also post offices can be approached for opening PPF account. What is a Cancelled Cheques, Its Uses,
Sign, SBI, Sample, KYC
6. One of the most important benefits of PPF account is that it is free of attachments. This means that
What is Benami Property Bill | Owners
even the court has no right of attaching a PPF account for recovery of defaulted loans from a loaner.
of Benami Properties May Lose Their
However, government has the right of touching the PPF account to deduct unpaid taxes if conditions
Properties
show up.
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Some Strict PPF Rules That One Needs to Follow Payments and Offers
Withdrawal Limit of PM Jan Dhan
Public Provident Fund has a set of predefined rules and one needs to make sure that all these rules are Yojana
followed. In case someone fails to follow the rules, PPF account can be terminated once found out by the Zero Balance Account through PM Jan
authorities. Different aspects of PPF are covered under these rules and include account opening, Dhan Yojana
maintenance of an account, loan facilities etc. Let us take a look at these rules. धानमं飽ी जन धन योजना
Rules for Opening PPF Account – Eligibility Rules Translate this Page In Hindi
1. No more than one account can be opened in name of one person. Select Language
2. The person should be an adult in order to open a PPF account. Powered by Translate
3. As long as a person is above 18 years, he or she can open a PPF account. There is no age cap
allotted.
4. The person needs to be RESIDENT INDIAN in order to open PPF account.
5. NRI’s or nonresident Indians are not allowed to open PPF account. There is however a small twist. If a
resident Indian opens a PPF account and then becomes NRI, he or she will be allowed to continue with
the account till it becomes mature. The 5year extension rule will however become void. The account
has to be closed after 15 years and all accumulated fund is to be withdrawn.
6. Under no circumstances can a foreigner (resident and citizen of another country) will be allowed to
open PPF account.
7. 2005 onward it became a rule that HUFs or Hindu Undivided Families cannot open PPF accounts. PPF
accounts that were already operational before May 13, 2005 will continue to exist until maturity.
However, the 5year extension rule will cease to exist.
8. An individual is also forbidden from opening PPF account on behalf of HUF.
9. Though it is a rule that a person needs to be an adult for opening a PPF account, there is a provision
of opening PPF account for minors too. However, under no circumstances the collective fund in the
http://pmjandhanyojana.co.in/ppfaccountbenefitstenureloanagelimitinterestratesopenonlinewithdrawaltax/ 4/12
12/22/2016 PPF Account | Interest Rate | Tax Benefits | Withdrawal | Age Limit PM Jan Dhan Yojana
minor’s account and in the account of the guardian or parent can exceed the maximum limit of INR 1.5
lakhs in any given financial year.
10. Grandparents are not allowed to open accounts in name of their grandchildren who minor. If
grandchildren are not minors, grandparents can open accounts for them.
Rules for Opening PPF Account – Documents that Need to be Furnished
There are several documents that one needs to provide while opening a PPF account. However, it is very
important that all the documents are latest and up to date. Here is the list of documents that a bank or a post
office will be asking for in order to open a PPF account:
1. Passport, Voter’s ID Card, PAN Card, Ration Card, Aadhar Card, Utility Bill, Employer’s Letter, Driving
License, Statements of Bank Account, Lease or Rental Agreement etc. Not all will be required but one
needs to provide that are proof of his or her identity and address. Which documents will be required will
be notified by the bank or post office.
2. A signed Cheque will be asked for as a document for signature verification.
3. Recent passportsized photographs will be required.
4. A completed form for account opening has to be submitted.
5. In case the person wants to select a nominee during account opening, a filled up nomination form has
to be submitted and should contain the name of the nominee(s).
6. In case the PPF account is opened for a minor, a proper birth certificate is to be furnished. In absence
of a birth certificate, a school certificate clearly mentioning the date of birth of the child has to be
provided.
Do remember that the list provided above is only general. In no sense it can be considered as exhaustive and
final. The post office or the bank may ask for other documents if deemed necessary.
How to Open a PPF Account?
This isn’t very terrible as it sounds. The steps are simple and very easy. As mentioned earlier, one can opt to
visit an authorized bank or a post office to open an account or simply use the online service of PPF account
opening. This online service is usually provided by authorized banks. Online account opening is not possible
in case a person chooses post office.
Let us take a look at both online and offline methods:
Offline Method for Opening PPF Account
1. Visit an authorized bank or a post office of your choice and ask for PPF account opening form and
nomination form (if you want to nominate someone).
2. Fill up the form(s) properly and the attach all the documents as mentioned by the bank or the post
office.
3. Submit the form along with the initial deposit that is required for opening a PPF account.
4. Wait until the bank or post office verifies all information.
5. Once the account is opened, you will be notified by the bank or post office.
Online Method for opening PPF Account
The benefit of this method over the offline method is that it takes out the need for physically visiting a bank or
a post office. It saves time and of course, cuts off some traveling expenses (if at all). However, there is a
problem. Online service is available only for banks.
1. Visit the bank’s online portal and click on open PPF account link.
2. Follow the steps that are required during online process. You will get onscreen instructions.
3. The bank may accept some documents in scanned format. In case that is not the case, you may
eventually have to visit the bank to provide those documents (for instance, if you are using SBI online
services, you will have to go to the bank to submit the documents manually).
4. You will get an option of linking your savings account directly to the PPF account so that you can
deposit the initial deposit amount. In case the bank requires manual submission of the form, you will
have to first deposit the initial amount manually at the branch.
Exact steps for online method cannot be provided because all banks have different navigation steps in their
online portals. You need to find out the same by logging into your net banking portal. If you have an account
in SBI, you will find the service under the tab eServices.
In this second part of the article titled Everything You Need to Know About PPF or Public Provident Fund, we
are going to cover several aspects like the list of banks where PPF account can be opened, types of forms
that are associated with PPF account, PPF investment defaults and deactivation and reactivation of PPF
http://pmjandhanyojana.co.in/ppfaccountbenefitstenureloanagelimitinterestratesopenonlinewithdrawaltax/ 5/12
12/22/2016 PPF Account | Interest Rate | Tax Benefits | Withdrawal | Age Limit PM Jan Dhan Yojana
account and more. Just like our previous part, this part of the article will be slightly long. Stay with us and by
the time you finish reading this article, you will be rewarded with a wealth of knowledge that will help you to
make informed decisions. So, without further ado, let’s begin with our journey!
List of Banks Where PPF Account Can Be Opened
List of All Public Sector Banks That Are Authorized to Open
PPF Account
Allahabad Bank
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Central Bank of India
Corporation Bank
Dena Bank
IDBI Bank
Indian Overseas Bank
Oriental Bank of Commerce
Punjab and Sind Bank
Punjab National Bank
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of India
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore
UCO Bank
Union Bank of India
United Bank of India
Vijaya Bank
List of All Private Sector Banks That Are Authorized to Open PPF Account
Axis Bank
ICICI Bank
The banks listed above may have different branches authorized for opening PPF account. In order to find out
the list of authorized branches, you can visit the online banking portal of each bank or simply visit the nearest
branch and ask for the list. People often ask whether HDFC bank has PPF options or not. Unfortunately,
despite its reputation, HDFC bank has received no authorization from the government to provide PPF
services to its customers. In near future the bank may receive authorization but that is uncertain.
Details of All Forms Associated with PPF Account
There are 8 different types of forms that are associated with a PPF account. These forms have been named
in alphabetical order from A to H. Let us take a quick look at purpose of each of this form.
Form A: This form is meant for opening a new PPF account. In case you want to open a PPF account, you
will be asked to fill up this form properly and submit it along with necessary documents. The details of the
account holder have to be included in this form which include name, PAN details, address, signature etc.
Even the details of the minor (in case the account is for a minor) has to be provided. In case an agent is
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12/22/2016 PPF Account | Interest Rate | Tax Benefits | Withdrawal | Age Limit PM Jan Dhan Yojana
mediating and helping to open up the account, the full name of the agent has to be included in the form too.
The amount of money that is being used for opening the account has to be clearly mentioned.
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Form B: This form is more like a payin slip. In case a person is physically depositing funds in the account or
is repaying the loan he or she has taken out against the PPF account or is paying the penalty amount for
account reactivation, he or she has to fill up this form and submit along with the money.
Form C: This form is designed for partial withdrawals, which are allowed only after the PPF account has
attained the age of 7 years. If you want to make partial withdrawals, you need to fill up this form stating the
withdrawal amount. A selfdeclaration is also required where you will need to require that no other partial
withdrawals took place in the same financial year. The form contains a place for this selfdeclaration.
Form D: Since PPF accounts allow loans, you can use this form for the purpose. Do remember that loans can
be taken out only from 3rd year of PPF till the 6th year of PPF account. This form is necessary for such loan
applications where the loan amount is to be mentioned and you as a borrower will have to agree to repay the
loan amount in entirety along with interest payments within 3 years from date of loan disbursal.
Form E: This is a nomination form. You will have to provide the name and address as well as your
relationship with the nominee in this form. In case you are selecting multiple nominees, the same details are
to be provided for each one of them. In addition, you will also have to state the %age of accumulated fund
each nominee gets in case of your death. You cannot select nominee(s) if the PPF account is in name of a
minor.
Form F: This form is designed for changing nomination information anytime during the full tenure of a
particular PPF account. The allowed changes are cancellation of nomination, replacement of nomination or
alteration of information of a nominee. Also the form can be used if you want to redo the percentage of claims
different nominees can lay on the accumulated fund.
Form G: is form is designed for the nominees or heirs (legal) who can lay claim on the accumulated PPF
funds in case the account holder dies. The legal heirs or nominees need to fill up all information (their details
and relationship with the deceased person) and also fill up the field which asks for confirmation that death
certificate of the deceased person has been attached along with the form.
Form H: This final form is designed for increasing the tenure of a PPF account in slabs of 5 years. This form
will require two specific information – date on which the PPF account was opened and the PPF account
number.
Now that you have a fair idea of all the forms that are associated with a PPF account, you should not have
any further difficulty in opening or managing your PPF account. In case you still face trouble, feel free to
speak to your bank personnel. They will be more than happy to help.
Interest Rates on PPF Investments
Okay, this is something that is very fascinating. Everyone want to know how much return they can expect
from their investments. However, just like any financial investment, PPF account is also subject to market
risks. Good thing however is that the interest rate remains fixed for a whole financial year. So, even if the
market rate of interest drops, you can still enjoy higher interest earnings as specified by the government. On
the other hand, if the market interest rates go up, you will be on the losing end of the game. There is
absolutely nothing you can do.
1 201617 8.1
2 2015 16 8.7
3 201415 8.7
4 2013 14 8.7
5 201213 8.8
6 201112 8.6
7 201011 9.5
8 200910 8.5
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9 200809 8.5
10 200708 8.5
11 200607 8.5
12 200506 8.5
13 200405 9.5
14 200304 9.5
15 200203 9.5
16 200102 9.5
17 200001 12
How is Interest on PPF Calculated?
Though no one has a hand in deciding the interest rates for PPF except the government, it is still good to
know how the interest rates are calculated for each year. There are two factors that pitch in. The government
takes account of the 10year government bond rates. These rates are dependent on current market rate for
bonds and inflation rates. If inflation and current market rate for bonds fluctuate, the 10year government
bond rates also fluctuate. Interestingly, the PPF interest rates are aligned with these 10year government
bond rates. Hence, if the government bond rates go down, PPF interest goes down and vice versa. This
again translates into the fact that PPF interest rates never go below inflation rates because inflation rate
decides 10year government bond rates! If you find this information too complex, you can safely ignore the
mechanism that drives the interest rates on PPF and always know that the interest rate on PPF will not fall
below inflation rate and hence, you are safe!
Historical Chart of Interest Rates on PPF
Deactivation, Reactivation and Penalty Rules of PPF Account
As mentioned in part I of this article, PPF account is subject to certain rules. One of them is a minimum yearly
deposit of INR 500. This has to be met under all circumstances. If you fail to deposit the minimum yearly
amount, the account will become inactive, that is, it will be deactivated. However, this deactivation is
temporary.
The temporarily inactive PPF account can be again reactivated by paying a penalty for each year during
which the account stayed inactive and at least the minimum yearly investment (he can pay more if he wants
to) for all years during which the PPF account was inactive.
Let us explain this with an example.
Suppose the account was opened in 2005 and the account holder invested regularly for first three years. That
is, he invested for 2005, 2006 and 2007. Then suddenly, he stopped investing for next three years, i.e. 2008,
2009 and 2010.
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So, the account became inactive in 2008 and it remained inactive till 2010. Now the person wants to
reactivate the account in 2011. Here is what he needs to do:
1. He needs to pay the penalty for year 2008, 2009 and 2010. This will be INR 50 for each year. This
means that total penalty will be INR 150 for three years.
2. He will have to pay at least the minimum yearly payment for the three years during which the account
stayed inactive. This means, he has to pay INR 500 for 2008, INR 500 for 2009 and INR 500 for 2010
and an additional INR 500 (minimum) for year 2011. This will be a total of INR 2000.
So in 2011, the person has to pay a total of INR 2000 + INR 150 = INR 2150 at once to get the account
reactivated.
However, one needs to keep one thing in mind. During the years when the account remains inactive, loan
facility will be inactive too!
Isn’t that simple? Well, believe it or not, it is really simple!
PPF Account – Withdrawal Rules and Closure Rules
PPF accounts are also subject to some rules when it comes to withdrawing funds from the account or closing
the account completely. Let us take a look at the rules in slight details so that you can get a clear
understanding of how it works.
No Closure Before Tenure Completion
You need to keep this in mind very seriously. Unless the account reaches its maturity, the PPF account cannot
be closed! This means that a PPF account needs to run its full course of 15 years before it can be closed.
Once the tenure is completed, i.e. 15 years are completed, you are free to withdraw the whole amount in your
PPF account, including the accumulated interest earnings and you can close the account.
PPF Account Partial Withdrawal Rules
That’s complete withdrawal rule. But what if, a person is in need of emergency funds? Well, there is a slight
glitch in this case. There are a few things that can happen
1. If emergency funds are required within the first two years of opening PPF account – there is nothing
that can be done. No one – no PPF account holder – is allowed to touch the funds within the first two
years.
2. If emergency funds are required on 3rd year or till 6th year of running PPF account – withdrawals are
not allowed but one can opt for loan against the PPF account at a very low interest rate of 2%. This
loan has to be paid back within 3 years from the date the loan is disbursed. However, if the person fails
to repay the loan in full within that time frame, interest rate will be increased to 6%.
3. The final option is that the emergency funds are required on 7th year or any year after that. This is
where PPF savings can come in handy. PPF allows partial withdrawal from 7th year onward. That is
after the completion of the 6th
In case you are going for partial withdrawal, there is a limit to how much you can withdraw. Here are the
rules:
The amount of partial withdrawal has to be lower of the following:
1. 50% of total accumulated balance in the PPF account at the end of 4th fiscal year. This 4th financial
year is calculated by counting backwards from the year on which the partial withdrawal is requested.
This means that if the partial withdrawal is requested on say the 8th year, counting backwards, the
fourth year will be 5th year of PPF. So, 50% of total balance in the account (invested amount + accrued
interest) will be eligible for partial withdrawal.
2. 50% of total balance available in the year right before the year in which the partial withdrawal request
has been made.
It will be very easy to assume that the first option will always be lower than the second option and hence, only
the first option applies. This however is true only for the first ever partial withdrawal. For the second time or
third time or any subsequent partial withdrawal, the second option is more likely to be valid. It has to be
remembered that only one partial withdrawal can be made in a given financial year.
PPF Account – Extension or Renewal
th
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A PPF account becomes mature when the 15th financial year is completed. This is counted from the financial
year in which the PPF account was actually opened. Upon maturity the account holder will have two options:
1. Withdraw everything from the account and close the account.
2. Increase the tenure of the PPF account in predefined slabs of 5 years each.
In case the second option is chosen, some other rules come in. These rules are:
1. Once the PPF account is renewed or extended for 5 years, the account holder may decide not to make
any new investments. There will be no penalties applicable for doing so and still the fund sitting in the
account will continue to earn interest at compounded rate. This interest earning will continue until the
end of the 5th year for the newly extended time frame. During this period, funds can be withdrawn.
There are no restrictions to the amount of fund that can be withdrawn except thatcomplete withdrawal
will not be allowed and withdrawal more than once in a single financial year is also prohibited.
2. The account holder may wish to keep investing. New investments will be added to the account and
interest will be calculated accordingly. Withdrawals are allowed once every fiscal year but withdrawals
will be limited to 60% of total accumulated fund in the account at the beginning of each 5year slab.
What Type of Taxation Rule Is Applicable for PPF?
Public Provident Fund falls under EEE taxation rule. EEE stands for ExemptExemptExempt. This means:
1. All investments you make under PPF (subject to a maximum of 1.5 lakhs a year) can be claimed for tax
deductions under Income Tax Act’s section 80C. This means that taxes will not be applied on those
investments while calculating income tax.
2. All interest earnings that are accrued under the PPF investments will be tax free.
3. Once the PPF account matures and the amount is withdrawn from the account, it will not fall under
wealth tax and will be handed over to the account holder as is without any deductions.
This means that inflow, growth and outflow are all exempted from taxation.
One interesting thing you need to know and carefully keep in mind is that:
“If you are investing in a PPF account in name of your child or in name of your spouse, you can still enjoy tax
benefits as long as the total yearly investments in all PPF accounts where you invest or contribute does not
collectively exceed INR 150,000 per year.”
This means that if the maximum cap is not adhered to and the investment amount exceeds the capped
amount, the excess will be taxed in inflow and outflow category. The excess amount will not earn any interest
and will simply sit in the account. That’s EEE rule will no longer be applicable for the extra investment.
What is a PPF Calculator and Why Is It Important?
You must have heard of PPF calculator and also seen one here or there online. Usually, this calculator can be
found on websites of banks and post offices but there are several 3rd party online services like simple
informative websites that can provide this calculator. So, why do you need it? Actually it is not mandatory to
use the calculator but it can be helpful. The ways it can help are:
1. If you are planning on investing in PPF and you have a certain yearly investment amount in mind, you
can calculate and see the amount of money you can earn by the end of 15 years and the amount of
tax you can save by that time.
2. You can also calculate the gains you can achieve if you decide to go for withinvestment or without
investment extension of account post maturity.
3. In case you have a PPF account in place and you are looking for loans or withdrawals, you can quickly
get calculations for remaining balance after withdrawals or amount of loan you are eligible for or
amount of interest you need to pay on your loans etc. This becomes really handy when you want to
compare such features against other financial tools like Mutual Funds, RDs and FDs etc.
4. PPF calculators are precoded with all rules of PPF. This means that if you are planning on loans or
withdrawals, you can find the exact amount you are eligible for within the set rules.
That’s pretty much everything you need to know about PPF or Public Provident Fund. However, before we
finish off this article, let us address some important questions that are frequently asked by people. Though all
the questions have already been answered, we will still give them in a comprehensive Q/A fashion for easy
grasping.
PPF – Frequently Asked Question
Question: Is it possible to have multiple accounts under a single name?
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Answer: No, that is totally not possible. However, you can always contribute to a PPF account that is opened
on someone else’s name like your child or your spouse.
Question: If the account becomes inactive for a few years, will I still continue to earn interest?
Answer: No! No interests will be earned for the years during which the account stays inactive. Once the
account is reactivated, interest earnings will start on the balance at the time when the account is reactivated.
Question: Is it possible to claim tax deductions on investments I make into PPF accounts on my
spouse’s or child’s name?
Answer: Tax deductions can be enjoyed only on the maximum capped investment amount of INR 1.5 lakhs.
Investments above that will be taxed. For example, if you invest 1 lakh yearly in PPF account on your name, 1
lakh yearly in PPF account on your spouse’s name and 1 lakh yearly in PPF account on your child’s name,
the total yearly investment becomes INR 3 lakhs. You can claim tax deductions on just INR 1.5 lakhs. The
remaining INR 1.5 lakhs will be taxed.
Question: What will happen to the excess investment above INR 1.5 lakhs per year? Will it earn
interest?
Answer: The excess investment above INR 1.5 lakhs will not earn interest. It will be taxed while calculating
income tax and it will also be taxed under wealth tax when withdrawing.
Question: What if the maximum investment cap in PPF is increased midway between a financial
year?
Answer: If that happens, you will have the liberty of investing the increased amount anytime during the year
before the financial year ends. Banks and post offices are all notified by government to accept additional
investments in case the investment limit is raised midyear.
Question: Last year I received interest for just 11 months and not for 12 months. Why so?
Answer: There is a specific method of calculating PPF interests. In order for an investment to be considered
for PPF calculation, one needs to make an investment either before 5th of every month or on 5th. After 5th, the
investment is not considered for interest calculation of that month. It will rather be carried over to the next
month for interest calculation. Also remember that the lower of the total fund in the account on 5th and on the
last day of the month will be considered for interest calculation. This can be clarified using an example.
Let us assume that you invest INR 1.5 lakhs a year but you do so in two installments. Once you pay INR 1
lakh in August and then you pay INR 50,000 in September. Now suppose you wanted to pay this INR 50,000
in September but you ended up paying it on 8th of September instead of 5th of September or on the first 4
days of that month. So, according to the rules, the interest calculations for September will not take account of
INR 50,000 investment. Interest will be calculated only on INR 1 lakh that you invested in August. The
additional INR 50,000 will be carried over to October for interest will be calculated accordingly. That’s the
reason why you missed a month’s worth of interest and received only 11 months of interest earnings instead
of 12 months.
Question: I want to extend by PPF account by just two years after it matures. Is that possible?
Answer: No that is not possible. Extensions are allowed only in blocks of 5 years – no more, no less.
Question: How many times can I extend my account in 5year blocks?
Answer: As many times as you want. There are no restrictions on this.
Question: Is it possible to avail both loan and partial withdrawal from PPF account at the same time?
Answer: Absolutely NOT! These two features are mutually exclusive. This means, if one exists, the other
cannot. Loan is allowed from 3rd year of PPF account to 6th year. Partial withdrawals are allowed only from 7th
year of PPF account. This means, they cannot coexist and hence, the idea of availing both at the same time
is completely ruled out by the laid down laws.
Question: I took a loan from a private bank and I defaulted. Will the bank take the money from by PPF
account?
Answer: No, that is not possible under any circumstances. By law, not even a court can attach the PPF
account and ask the bank to recover the money from the account. This means that PPF investments will stay
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intact even if you default on other loans. However, if you default on your taxes, the government has full rights
to liquidate your PPF account partially or completely and take the amount of taxes you owe.
Well, this concludes our article on Public Provident Fund. In case you have any further questions, feel free to
drop your comments. We will try our best to answer your queries.
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