How to Open a Public Provident Fund Account?

If you have wondered, “are PPF investments good?” then a careful analysis of your reason for investing can help you find the answer. You might also be wondering, “is PPF relevant in the age of cryptocurrencies?”

To know more about PPF, let's understand PPF investments, how to open a PPF account and how to invest in PPF in detail.

Floated and backed by the Government of India

PPF was floated by the Government of India to encourage people to save money for the long term. It is backed by the Government of India and can be considered among safe investments. Providing interest higher than bank fixed deposits is one of the aims of PPF. Moreover, to further promote investing in a PPF investment plan, the government has made PPF principal and interest tax exempt.

1. Tenure

A PPF investment plan is designed to be a long-term one. The initial tenure for a PPF account is fifteen years. After the initial fifteen years tenure, it can be extended to five years.

2. Principal amount

• The minimum investment in a financial year is ₹500, and the maximum is ₹1,50,000.
• You may invest in your PPF account in periodic, regular instalments systematically or as a one-time lump sum.
• You have to invest a minimum amount of ₹500 every year.
• You can invest using any mode amongst cash, cheque, demand draft or online transfer.

3. Eligibility

• If you are a resident Indian citizen, you are eligible to invest in PPF. As a parent, you can open and operate a PPF account in the name of your minor children.
• Non-Resident Indians or NRIs are not permitted to open a new PPF account. However, they may continue to invest in their PPF if they had opened one while residing in India.
• A PPF account can only be held in the name of a single individual. Joint PPF accounts are not allowed. PPF accounts in the name of a Hindu Undivided Family or HUF are also not allowed.

Steps to Open a PPF Account

You can open a PPF account from a bank which offers a PPF account facility. You may even open it from the post office. You may use either online or offline modes for opening a PPF account.

A Public Provident Fund (PPF) account is exclusively available for opening at specific bank branches, including those of: 

• State Bank of India (SBI) and its affiliated branches
• ICICI Bank
• Axis Bank
• HDFC Bank
• Central Bank of India
• Bank of India (BOI)
• IDBI Bank
• Punjab National Bank
• Indian Overseas Bank, along with a few others.

How to Open a PPF Account Offline?

To initiate the online procedure for opening a PPF account, you'll need an active savings account with a participating bank or Post Office, and internet banking or mobile banking activated for the same.

Here's a step-by-step guide for the online method:

1. Log in to your internet banking or mobile banking account.
2. Locate the 'Open a PPF Account' option and click on it.
3. If you're opening the account for yourself, select the 'Self Account' option. For a minor account, choose the 'Minor Account' option.
4. Fill in the necessary details in the application form and verify their accuracy.
5. Enter the total amount you intend to deposit into the account each financial year.
6. Optionally, set up standing instructions to automatically debit the specified amount from your savings account and credit it to your PPF account as per your preferred intervals.
7. Submit the application. An OTP will be sent to your registered mobile number to authorize the transaction.
8. Input the received OTP to confirm your identity.
9. Your PPF account will be created, and a success message will confirm it on your screen. Additionally, an email containing all the relevant details will be sent to your registered email address.

How to Open a PPF Account Online?

The offline method involves the following steps:

1. Complete the PPF application form, providing accurate details.
2. Gather all the required documents for submission along with the application.
3. Visit the bank or Post Office where you intend to open the account. It's advisable to hold a savings account with that branch for seamless PPF account opening.
4. Hand over the documentation to the bank or Post Office representative for processing.

Feel free to choose the method that best suits your convenience and needs.

Documents Required for Opening a PPF Account

The following documents are required to be produced to open a PPF account:

• Identity proof such as an Aadhar card, Voter’s ID or driving licence.
• PAN card
• Proof of residential address
• Nominee declaration form
• Passport sized photograph

Interest Paid & Tax Implications of PPF

• The Central Government of India determines the interest paid on PPF accounts. The aim is to provide higher interest than that offered by banks. The Governments may update the rate of interest every quarter.
• The current rate of interest on PPF accounts is 7.1% (on July 2022) compounded annually.
• T The principal amount invested in PPF is income tax exempt. Moreover, the interest earned on a PPF account is also tax-exempt. It also means that at the end of the tenure, when you withdraw the principal and the interest, the whole amount withdrawn is income tax exempt.

Premature Withdrawal of PPF

As such, the withdrawal period for PPF is after fifteen years of account opening. However, you may be allowed partial premature withdrawal after five years of account opening.

Up to 50% of the balance of the preceding year can be withdrawn once in each financial year after five years of account opening.

Loan against PPF

You may avail of a loan against your PPF account between the third and fifth years. You can avail a loan of up to 25% of your account balance at the end of the year before. If you repay the first loan, a second loan can be taken till the 6th year.

In summary

PPF is a long-term conservative investment yielding returns higher than bank fixed deposits. It is backed by the Government of India. The principal invested, the interest earned, and the final withdrawal amount are income tax exempt. You can open a PPF account at a bank which offers a PPF account facility or at the post office.

Frequently Asked Questions

1. What is the best way to invest in PPF?

You can invest in PPF at a branch offering a PPF account facility or the post office. You can use both the offline and online modes of account opening. Choose a mode that suits you best.

Do you have a financial goal, but you want to reach it through regular and small savings? The Fi Money app brings to you short-term and medium-term deposits named Jars. Create a Smart Deposit Jar named after your goal, say, “Marriage Jewellery”, and start your savings journey.

2. Are PPF investments a good idea?

PPF is a long-term conservative investment yielding returns higher than bank fixed deposits. It is backed by the Government of India. The principal invested, the interest earned, and the final withdrawal amount are income tax exempt. Very few investments enjoy such generous tax exemption benefits. You can open a PPF account at a bank which offers a PPF account facility or at the post office.

All of these taken together are a very attractive package for the conservative, risk-averse or even the moderate, risk-neutral investor. It is a good idea to invest in PPF if you are looking for a long-term, safe, convenient, tax-exempt investment avenue which offers interest rates better than bank fixed deposits.

3. Do PPF investments give monthly interest?

Interest is calculated every month in a PPF account. It is computed based on the lowest balance held in the account between the fifth day of the month and the last day of the month.

Interest is credited to the PPF account at the end of each financial year.

Got your PPF amount after maturity? Want to boost your investments even further? You can consider investing it in mutual funds with the Fi Money app. Make informed investing decisions with extensive investment knowledge and insights at your fingertips.

4. How much money will I get after 15 years in PPF?

How much you will make after investing in a PPF for 15 year entirely depends on the amount you invest. The current PPF rate is 7.1%, you can calculate your earnings keeping this rate in mind.

5. What are the disadvantages of PPF?

Some disadvantages of PPF are -

1. Long lock-in period of 15 years.
2. Limited annual investment amount.
3. Low liquidity due to restrictions on early withdrawals.
4. Returns are relatively low compared to other investment options.
5. Interest rates on PPF are subject to change on an annual basis.