Frequently asked questions about Public Provident Fund (PPF)
Inflation and increased life expectancy can be a double whammy on your life’s savings. Imagine needing regular medical care during your post-retirement years. Go to the hospital once too often and your bank balance may soon dwindle to nothing. That is why building a large retirement corpus has become a necessity. If you are not sure where to start, the Public Provident Fund (PPF) is a good option for retirement planning. To help you out further, here is a quick list of frequently asked questions about PPF.
What is a PPF account?
A PPF account is a tax-efficient, long-term investment option. Introduced by the Ministry of Finance in 1968, the PPF has become one of the foremost instruments for retirement savings in India. The fund matures after 15 years.
How do I open a PPF account?
Only resident Indians above 18 years of age can open a PPF account. The documents required include proofs of identity, address, and signature. You would also need to submit the account opening form, duly filled in. To open a PPF account, visit the post office or the relevant bank branch. Just remember, only some authorised bank branches provide PPF services.
Can I open a PPF account online?
Yes, you can open a PPF account online by visiting the bank’s website. Or, go through the website of a third-party financial service provider.
What is the lock-in period of PPF?
PPF accounts come with a lock-in period of six years. But this does not mean you cannot touch the money all this time. For instance, you can avail loans on your PPF account between the third and sixth years.
What are the PPF withdrawal rules?
From the seventh financial year onwards, you can make partial withdrawals from the account. The amount withdrawn must not exceed 50% of the fund balance at the end of Year 4 or the preceding year, whichever is lower. Withdrawal of the full amount is possible only upon maturity.
What are the rules of PPF withdrawal after death?
It may happen that the accountholder passes away during the tenure of the PPF investment. The nominees or legal heirs of the late accountholder can then lay claim on the funds. To do this, they would have to produce proof of death of the accountholder. Moreover, there may be more than one nominee at times. Here, the corpus distribution will depend on the shares mentioned in the nomination form.
How much income tax can I save on PPF?
You may claim tax benefits under Section 80C of the Income Tax Act for PPF investments. The tax benefit applies up to a maximum yearly investment of Rs 1.5 lakh.
How much can I invest each year?
The minimum amount of investment in a PPF account each year is Rs 500. The upper limit is Rs 1.5 lakh.
What are the returns on investment like?
The current yearly rate of interest on PPF accounts is 8.1%. The interest earned is compounded yearly.
What are the PPF nomination rules?
You could name your nominee or nominees at the time of opening the PPF account. The other option is to name your nominees later on. In both cases, the bank or post office would request you fill up a nomination form.
Can I transfer a PPF account from one bank to another?
Yes, you can transfer your PPF account from one bank or post office to another. To avail this option, you would need to submit a PPF transfer request at your current bank or post office. The account will now work as a continued account. Your current branch will send all your documents to the new branch.