Updates and details for What is Public Provident Fund? Interest Rate, Eligibility, Advantages:
The Public Provident Fund is a savings-cum-tax-saving instrument in India which was introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to assemble small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of the court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.
Investment and returns
A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of Rs 1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year. There must be a guardian for PPF accounts opened in the name of minor children. Parents can act as guardians in such PPF accounts of minor children.
Any amount deposited in excess of Rs 1.5 lacs in a financial year won’t earn any interest. The amount can be deposited in lump sum or in a maximum of 12 installments per year. The Ministry of Finance, Government of India announces the rate of interest for PPF account every quarter.
The current interest rate effective from 1 October 2016 is 8.0% Per Annum’ (compounded annually) which was revised from 8.10% effective from 1 April 2016. Interest will be paid on 31 March every year. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.
Must check: What is Capital Gains Tax? – CGT Rates in India
Duration Of Scheme
Original duration is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each.
Interest Rate on PPF Deposits
The current PPF Interest Rate is 8.0%. PPF Interest is computed for a calender month on the basis of the lowest balance in an account between the close of the 5th day and the end of the month and the Interest on PPF Account is credited to the account of the account holder at the end of the year.
Here, I have given the list of the past few years PPF Interest Rate. Check it from below.
| Financial Year | PPF Interest Rate |
| 2013-14 | 8.7% |
| 2014-15 | 8.7% |
| 2015-16 | 8.7% |
| 2016-17 | 8.1% |
Benefits of Investing in a PPF Scheme
From below, you can check some advantages of PPF accounts.
- Attractive long-term investments: With a deposit period of 15 years and a lock-in period of 7 years, these accounts serve long-term investment goals. With interest rates compounded annually, effective returns tend to be more attractive vis-a-vis bank FDs.
- Useful for retirement planning: Long-tenures, compounded, tax-free returns and capital protection make this an ideal option for building a retirement corpus.
- Tax-free returns: Tax-free interest and withdrawals and tax-deductible investments.
- Low-risk: Being government-backed, there is low risk of default.
- Easily accessible: PPF accounts can be opened at nationalised, public banks or post offices and select private banks, all of which have wide reach. Accounts can be opened online as well.
- No attachment: PPF funds can’t be attached under court order or laid claim to by creditors.
Also Read: Demand Draft – How to make/cancel DD?
Eligibility – Who can open a PPF Account?
- Only one PPF account can be opened per person. Resident Indians, 18 years or older, can open a Public Provident Fund Account. There is no upper age limit for opening this account.
- Accounts can be opened for minors. Minors are those below the age of 18 years. However, the maximum limit of Rs.1.5 lakhs per year applies to deposits made in the minor and the major’s/guardian’s account, collectively. Grandparents cannot open an account in the names of their minor grandchildren.
- Non-resident Indians (NRIs) cannot open a PPF account. However, account-holders who leave the country and obtain non-resident status after having opened a PPF account can continue to maintain their accounts until it matures i.e. until the end of the account’s 15 year term. NRIs are restricted from extending account tenures at maturity.
- HUFs cannot open a PPF account, effective 2005. Those accounts opened by HUFs before May 13, 2005 can be continued until maturity without further extensions. An individual cannot open an account for an HUF (Hindu Undivided Family).
- Foreigners cannot open a PPF account.
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