PPF Account: Features, Interest Rates, Withdrawals; Key things you need to know

Public Provident Fund (PPF) is one of the fixed income financial instruments. Guaranteed by the government, returns on PPF depend on market performance, while some offer fixed returns. Some are open-ended with no lock-in period, some have a lock-in period.

PPF comes under small savings schemes, the interest rates of which are reviewed on a quarterly basis. PPF is a long-term investment option that comes with a sovereign guarantee. You can use PPF account to accumulate wealth over the long term.

Main features of PPF

Investors can invest a minimum of Rs 500 per year and up to Rs 1.5 lakh per year in their PPF account.

As per the guidelines, investors can invest their money in their PPF account for 15 consecutive years. However, if one does not need the money at the end of 15 years, he can extend the tenure of the PPF account for as many years as required. This can be done in a block of five years by submitting the PPF account extension form.

PPF is also one of the very few schemes that offers the public the option to save tax with its Exempt-Exempt (EEE) feature, which means it is a completely tax-free savings option. No tax will be deducted on principal, profit and accumulated amount on withdrawal.

A single adult who is an Indian resident can open a PPF account, while a guardian on behalf of a minor/person of unsound mind can also invest in PPF.

ppf interest rates

The interest rate on PPF is currently 7.1 percent. It is reviewed on quarterly basis.

How to withdraw PPF money?

For premature withdrawal, a customer can take a withdrawal during a financial period after five years excluding the year of account opening. Only 50 per cent of the credit balance at the end of the fourth consecutive year or at the end of the previous year, whichever is lower, can be withdrawn.

a) After 15 years, a PPF subscriber takes the maturity payment by submitting the account closure form along with the passbook at the concerned post office.

(b) He can retain the maturity value in his account even without depositing any amount. In this case, the PPF interest rate will be applicable and payment can be taken at any time. Alternatively, the customer can take a withdrawal every financial year.

(c) The customer can extend his account for next five years and so on (within one year of maturity) by submitting a prescribed extension form in the concerned post office.