PPF - Public Provident Fund

The primary importance of a Public Provident Fund is its safety as a Government of India-backed small savings scheme. Moreover, this investment option is available to every resident individual in India making it a widely availed route for long-term savings. The scheme’s popularity in India is clear from a 2022 report from the Ministry of Finance which estimated that there were over 40 crore PPF Accounts in India.

While many tend to perceive its long lock-in of 15 years as a limitation, this can be a helpful feature for individuals who might otherwise lack adequate financial discipline to maintain long-term savings. The importance of PPF as a popular investment route is further underscored by its fixed returns, long-term compounding benefits and tax-free maturity proceeds that are considered to be hallmarks of this scheme.

The investment in the Public Provident Fund falls under the EEE (Exempt-Exempt-Exempt) category. This means that the amount you invest in PPF, the interest earned, and the maturity amount are completely tax-free.

Contributions to PPF can be claimed as a deduction under Section 80C of the Income Tax Act.  A maximum deduction of up to Rs. 1.5 lakh can be claimed under this section. However, this tax benefit is only applicable if you have opted for the old tax regime.

Moreover, interest on PPF is tax-free irrespective of the tax regime you have chosen. This combination of fixed predictable returns, safety and tax benefits have played a key role in ensuring the continued popularity of PPF among some key types of long-term investors.

Here are the Public Provident fund (PPF) account eligibility criteria you must be aware of before investing:

• Only an Indian resident can open a Public Provident account.
• An individual can only open one PPF account.
• Individuals over 18 years can open a PPF account, and there is no upper age limit. However, a minor can also open a PPF account, but under the supervision of their parent.
• HUFs and NRIs cannot open a new PPF account. However, if a NRI opens a PPF account as a resident, he/she is allowed to continue operating the PPF account to maturity after attaining NRI status.

The PPF account has an initial tenure of 15 years. At the end of 15 years, you have two options: withdraw the entire amount or extend the account in blocks of five years.

The extension can be done with or without contributions (default option). Each option has different rules for contributions.

Numerous reasons make Public Provident Fund Investment Plan an ideal long-term investment plan. Some of the benefits of the PPF plan are mentioned below.

A PPF account can serve as an effective long-term savings tool. However, account holders can realise its full potential only by managing it consistently over the years. Since a PPF account usually runs for 15 years and individuals can extend it further, small decisions can have a significant impact on the final corpus.

The following practices can help keep a PPF account organised and help individuals achieve their long-term financial goals.

You can open a PPF account via either the online or offline. The traditional offline method involves visiting your nearby bank branch or India Post Office to fill out and submit the PPF account opening form along with applicable KYC documents. However, these days you can open a PPF account online from the comfort of your home.

Mentioned below are the key steps you need to complete in order to open your Public Provident Fund Account online:

Although the process of opening a PPF account looks simple, account holders must submit some specific documents to complete the verification process based on regulatory guidelines. Financial institutions use these documents to verify the identity of the applicant, confirm their residential details, and make sure the eligibility requirements for opening a PPF account are met.

Transferring a PPF account to another post office branch or the branch of a bank is allowed. Similarly you can switch your PPF account from the post office to a bank or vice versa as per you need. However, this facility is currently not available via an online route.

Here is the offline procedure you must follow to transfer your PPF account:

• Step 1: Visit your existing bank or post office branch where your PPF account is currently held
• Step 2: Request the application form for PPF account and fill it out with relevant information
• Step 3: The representative will process your application. Then, he sends it with the required documents and payment to the new branch.
• Step 4: Once the new branch receives your application, you must submit a new PPF account application. Also, you need to submit the old PPF account passbook.
• Step 5: Once your application is processed, your PPF account is transferred to the new branch.
• Step 6: Visit you new branch to activate the account and get a new passbook issued as well as printed with updated details.

Note: The above steps are illustrative only. Actual transfer process may vary based on the current and later PPF account provider bank or Post Office Branch.

In order to link your Aadhaar with a PPF account online, follow these simple steps:

• Step 1: Log in to your bank’s internet banking portal.
• Step 2: Tap on the ‘Registration of Aadhaar Number in Internet Banking’ option.
• Step 3: Enter your Aadhar number.
• Step 4: Select the PPF account to link it to the Aadhar number.
• Step 5: On the homepage, tap on the “inquiry” option to check if the request is completed.

Note: Linking of Aadhar with PAN is also mandatory. In case you have already linked your PAN and Aadhaar, you may not be required to separately link your PPF Account with Aadhaar.

If your PPF account has become inactive, you will need to physically visit the bank branch/India Post Office branch where your PPF account was opened. Then you can follow the steps below to reactivate an inactive PPF account:

• Firstly, submit a written letter to the post office or bank requesting to reactivate it.
• Also ensure you attach a copy of the PPF passbook to this request and carry the original PPF passbook with you for verification purposes. You may also need to resubmit applicable KYC documents as part of the reactivation process
• Pay the minimum contribution of ₹500 for each non-contributory year along with the penalty of ₹50 per inactive year.
• Once you have paid the dues and the bank or post office has verified that you request is valid, your request will be processed and the inactive PPF account will be activated.

Note: The above steps to reactivate an inactive PPF account are illustrative. You might be required to complete additional steps on a case by case basis as the discretion on the bank branch or India Post Office.

PPF withdrawal rules are structured around a 15-year lock-in period. It offers options for partial withdrawals, full withdrawals upon maturity, and premature closure.

• Full withdrawal at maturity: You can withdraw the complete amount after 15 years when the PPF account matures.
• Partial withdrawal: This is allowed after completion of 6 years from the date of account opening. You can withdraw up to 50% of the balance at the end of the year preceding the year in which you are making the withdrawal.
  So, if you are withdrawing in the 10th year, the balance at the end of the 8th year will be considered for calculating the premature withdrawal amount.
• Premature closure: Premature closure is allowed only for specific reasons such as death of the primary holder, serious illness resulting in financial strain, etc.

These provisions related to closure and partial withdrawal are available in the amended PPF Act.

In order to withdraw the PPF amount, an individual must submit the Form C/Form 3. This form has three sections:

Here are some of the key limitations of PPF account that investors should be aware of before selecting it as their preferred savings option:

Closing a PPF account depends on whether you are closing it. As per the rules governing public provident fund accounts, you cannot withdraw money before the completion of its tenure. However, premature withdrawal of up to 50% is allowed after five years under special circumstances only.

You can close your PPF account once it matures after completion of the 15 year tenure. Here is how to do it:

• Step 1: Fill in the required information in Form C and attach your PPF passbook.
• Step 2: Submit the form to the bank branch/post office where the account is held.
• Step 3: Your application will be processed. You will get the payment in your savings account linked to the PPF account.

Public Provident Fund (PPF) is one of the most popular tax-saving investment plans in India. It is a long-term investment option with a 15 year tenure and tax-free assured returns, making it ideal for conservative individuals looking to achieve various long-term financial goals such as retirement. However, it is important to keep in mind that such traditional savings schemes might not be enough to tackle rising inflation and living expenses in future. Therefore, considering a more lucrative option is necessary for better retirement planning.

One such option is the Axis Max Life Capital Guarantee Solution. This offers the benefit of market-linked growth, protection of the principal invested and in-built life cover benefit – all in a single solution. This plan allows policyholders to invest in equity, debt or hybrid funds through a ULIP such as the Online Savings Plan while guaranteed returns are ensured through the Smart Wealth Advantage Guarantee Plan. This combination minimises the risk for the policyholder while protection of loved ones is ensured through the death benefit payable in the case of the life-insured’s demise during the policy term.