PPF: Savings cum tax saving investment and its latest rules

Last updated: 27 August 2022

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The Public Provident Fund (PPF) is a government-backed, low-risk investment offering guaranteed returns and tax benefits. It's ideal for those seeking long-term savings and a retirement corpus, with a minimum tenure of 15 years and an attractive interest rate. Recent rule changes include easier account extensions, updated premature closure conditions for non-residents, and revised loan interest rates and repayment terms.

PPF is one of the best long term investment options with attractive rate of interest and returns on investment for the individuals who have low risk appetite. It can also be called as savings cum tax savings investment option to save taxes and earn guaranteed returns. PPF is a government backed scheme which enables you to create lump sum retirement corpus. As the returns are fixed, it is also used as a diversification tool for the investor’s portfolio along with tax saving benefits.

PPF: Savings and Tax Saving Investment Rules

ESSENTIAL FEATURES OF PPF

TENURE: Minimum tenure of 15 years.
INTEREST RATE: 7.1 % compounded annually
DEPOSIT LIMITS: Minimum investment of Rs.500 and maximum of Rs.1.5 lakh for each financial year
MODE OF DEPOSIT: Can be made either by way of cash , cheque , DD or through online fund transfer
DEPOSIT FREQUENCY: At least once every year for 15 years.
RISK PROFILE: Low risk factor involved with risk free returns.
TAX SAVING BENEFIT: Up to Rs. 1.5 Lakh under section 80C

PPF: CHANGED RULES

ACCOUNT EXTENSION: After maturity, Form 4 needs to be submitted to extend it. Extension can be done in block of 5 years. PPF account can also be retained after maturity without depositing more funds and interest can be earned on balance amount as per respective rate. Application for extension should be done within one year of maturity of your original or extended account.
PREMATURE ACCOUNT CLOSURE : Apart from premature closure earlier under special circumstances requiring need for money , now PPF account can be prematurely closed if your residency status changes from resident to non- resident . For this, documents like passport, visa or income tax returns needs to be submitted.
ACCOUNT DEPOSITS: There is no restriction on number of deposits now. You can deposit in multiples of Rs. 50 but minimum should be Rs. 500 and maximum amount cannot exceed Rs. 1,50 ,000 annually.
INTEREST ON LOAN AGAINST PPF: The government has reduced interest rate from 2% to 1 % (over prevailing interest rate on PPF), thereby reducing cost of loan against PPF.
LOAN REPAYMENT TERMS: Loan should be repaid within 36 months. In case of failure (partial or full), penal interest is charged at 6% per annum. Also, second loan can be obtained only after closure of first loan.

PPF with changed rules also, still serve as a tax saving investment option. It was introduced with the objective to mobilize small savings in the form of investment along with return on it. So, anyone looking for a safe investment option to save taxes and earn guaranteed returns can go for PPF certainly.