What is a PPF Account?
24 Nov 2021

What is a PPF Account?

A complete guide on PPF Account meaning, features, and withdrawals.

Key Takeaways

  • Public Provident Fund or PPF is a government-backed long-term savings scheme.
  • You can invest up to 150,000 per annum in PPF and enjoy Section 80C tax benefits.
  • PPF comes with a lock-in period of 15 years, but you can make partial premature withdrawals after some years.
  • The amount invested, interest earned, and maturity amounts are entirely tax-free
  • You can open PPF Accounts at post offices and nationalised or private banks.

What is a PPF Account?

Public Provident Fund or PPF Scheme was introduced by the Central Government of India in 1968, as a small savings scheme to encourage individuals to invest in small amounts and earn returns. It is a long-term investment plan that offers attractive rates of interest that allows you to fetch decent returns on maturity. Along with earing additional income, this investment scheme also grants you certain tax benefits that help you reduce your tax out-go each year.

What are the Features and Benefits of a PPF Account?

Having explained What is PPF Account, let us analyse its features and benefits. They are as under:

Interest rate

PPF offers one of the highest interest rates on Section 80C deposits. The Finance Ministry reviews the interest rate every quarter, which means it is modified four times in a given financial year.

Investment term

PPF comes with a fixed lock-in period or investment tenure of 15 years. You may extend the tenure in blocks of 5 years, after the initial tenure ends.

Tax benefits

PPF falls within the Exempt- Exempt- Exempt (EEE) category of taxation. Thus, all deposits made in the PPF are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The accumulated amount, interest earned, and maturity amount is also tax-free on withdrawal.

Deposit limits

You must deposit a minimum of INR 500 per annum, while the maximum deposits should not exceed INR 150,000 per annum. Also, you cannot open more than 1 PPF account.

Compounding benefits

The funds you deposit every year earn you interest. With every passing year, your interest income increases due to growing deposits, which means you can earn compounding benefits.

Withdrawal regulations

PPF comes with a fixed maturity period of 15 years. However, you may initiate partial withdrawals at the end of the 6th year of investment. Furthermore, you make withdrawals only once a year, with a withdrawal limit of only 50% of the amount in the account at the end of the 4th year.

How to Open a PPF Account?

You can easily open a PPF Account through Nationalised and Private sector banks or post offices in India. You can visit post office branch or open the account online through banks. You must fill out an application form and submit the required documents to open your PPF Account.

Final Note

The only way to secure your financial well-being is to save and invest money. While there are various ways to save money, government-backed schemes are considered to be a relatively safe option. PPF is one such savings scheme, ripe with incredible features and benefits, including the high interest rates offered, interest compounding benefits, and the ability to create a lumpsum amount for your golden years.

Now that you know PPF Account meaning, you can open one instantly. You can reach out to your bank or nearby post office to begin the account opening process.

Download the digibank by DBS app to get started and even open your savings account with us.

*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.