Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India. It also serves as a retirement-planning tool for many of those who do not have any structured pension plan covering them.

The account can be opened in designated post offices, State Bank of India branches and branches of some nationalised banks. ICICI Bank was the first private sector bank which was authorized to open PPF accounts.

Eligibility

Individuals who are residents of India are eligible to open an account under the Public Provident Fund scheme. A PPF account may be opened under the name of a minor by his/her legal guardian. However, each person is eligible for only one account under his/her name.

Guardina in relation to 'minor' means:

(i) Father or Mother and 

(ii) Where neithr parent is alive, or where the only parent incapable of acting, a person entitled under law for the time being force to have a care of the property of the minor. 

Non-resident Indians (NRIs) are not eligible to open an account under the Public Provident Fund Scheme. However, if a resident, who subsequently becomes a NRI during the currency of maturity period prescribed under Public Provident Fund Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation basis.

[edit]Investment and Returns

A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account, and a maximum deposit of Rs. 100,000 can be made in a PPF account in any given financial year. The investments can be made in multiples of Rs. 5, either as a whole sum, or in installments (not exceeding 12 in a year, though more than one deposit can be made in a month). The credit to the PPF account is made on the date of the presentation of the cheque, not on the date of its clearance.

Every subscripttion should be made in cash or through a crossed check or draft or postal order, in favor of the accounts office, at the place at which that office is situated. In case of any cheque, draft or postal order should be drawn at a bank or post office at that place. It is also possible to transfer funds online using net banking in a PPF account opened with SBI.^[1]

Rate of Return on PPF is 8.8 % p.a. (Compounded annually). Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month. Till March 2010, cheques deposited for clearing, up to 5th of the month were eligible for that month's interest. Since 29 March 2010, only the amounts which are actually cleared on or before the 5th of the month are eligible for that month's interest.

The minimum tenure of the PPF account is 15 years, which can be further extended in blocks of 5 years each for any number of blocks. The extension can be with or without contribution. An account holder, continuing with fresh subscripttion, can withdraw up to 60% of the balance to his credit at the commencement of each extended period in one or more installments but only once in a year.

Nomination facility is available. In the case of joint nominees, it is possible to allocate the percentage of benefits to each nominee.

[edit]Loans

A loan repayable in 36 months can be obtained in or after the 3rd year, up to 25% of the balance at the end of the preceding financial year. The interest charged on the loan is 1 per cent for the first 36 months, and thereafter, 6 per cent on the outstanding amount. A second loan can be obtained before the end of the 6th financial year if the first one is fully repaid.

[edit]Withdrawals from PPF account

There is a lock-in period of 5 years and the money can be withdrawn in whole after its maturity period. However, pre-mature withdrawals can be made from the end of the fourth financial year from when the PPF commenced. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of the fourth financial year.

[edit]PPF defaults and revival

If the PPF account-holder fails to deposit the minimum Rs. 500 in a given financial year, the account is considered as discontinued and loans and withdrawals are not allowed. However, the interest will continue to accrue, to be paid at the end of the term. This account can be revived on payment of a fee of Rs 50 for each year of default, along with the arrears of subscripttion of Rs. 500 for each such year.

[edit]PPF tax concessions

Interest earned is fully exempt from tax without any limit. Annual contributions qualify for tax rebate under Section 80C of Income tax Act. Contributions to PPF accounts of the spouse and children are also eligible for tax deduction. Balance in PPF account is not subject to attachment under any order or decree of court. But, Income Tax authorities can attach the account for recovering tax dues. The highest amount that can be deposited is 1,00,000