Public Provident Fund (PPF) – is one of the popular, preferred, and preeminent tax saving investments . We all know about PPF. But do we know all about PPF?
Let us discuss in detail the less known facts of PPF in this article and understand it comprehensively and completely.
1)What is PPF?
2)How to open/invest in a PPF account?
3)What is the interest rate of the PPF scheme? (as in 2021)
4)How is the interest calculated in a PPF account?
5)When does PPF interest get credited?
6)What is the minimum and maximum investment of a PPF?
7)What are the tax benefits in a PPF account?
8)When does a PPF account mature?
9)How to extend the PPF maturity period?
10)Can I withdraw from my PPF account before maturity?
11)How to withdraw from PPF account after maturity?
12)Can I get a loan against my PPF account?
13)Can an NRI open a PPF account?
14)What happens if the PPF account holder dies?
15)PPF nomination rule.
The Public Provident Fund (PPF) Scheme is a tax-free savings account scheme offered by the Government of India.
The PPF is a safe investment because it is backed by the Government and can’t be attached to your debt or liability. The benefits of a PPF account you can enjoy are high returns, tax exemption, and security to capital.
Places, where a PPF account can be opened are Post Office & Banks(Selective). Most banks offer online facilities to open a PPF account, whereas a Post Office still follows the traditional offline method. Let’s take a look at the eligibility criteria and requirements to open a PPF account.
Eligibility to open a PPF account:
Documents required to open a PPF account:
Remember to take all the originals and also a photocopy that is self-attested. A minimum deposit of ₹ 500 should be made while opening the PPF account.
The interest rate of the PPF scheme will change for every quarter of a financial year in accordance with the Government bond yield.
The interest rate of the PPF savings scheme has been around 8% on average for the past 15 years consistently.
The current interest rate for PPF is 7.1% p.a for the 2nd quarter (July – September) of 2023.
For the balance amount in your PPF account, the interest is compounded annually. However, the interest calculation will be done each and every month.
A tip to get maximum interest from PPF:
If your contribution to the PPF account is credited on or before the 5th of that month, then that contribution will bear interest for that month too. If it is credited after the 5th of that month, you will get interest only from the subsequent month. Therefore, if you make sure your contribution is
getting credited to your account on or before the 5th of that month, and then you will not miss the interest for that month as well.
As per norms, PPF interest is calculated every month but it is credited into the account at the end of every financial year on March 31.
The minimum amount needed to be invested every year is Rs.500. The maximum amount of investment allowed every year is ₹ 1.50 lacs.
You can make investments in a lump sum or through a maximum of 12 installments per year. If your minor child also holds a PPF account then the combined limit of both the PPF account is limited to ₹ 1.50 lacs.
Not making the minimum investment in a year will attract a penalty of ₹50.
If you invest more than the ₹ 1.5 lacs limit, you will not get any interest for the excess amount and it will be refunded to you.
Under Section 80 C, the contribution you make in PPF is eligible for a tax deduction. Also, the interest from PPF is also tax-free.
These tax benefits are available as the PPF falls under EEE (Exempt, Exempt, Exempt) tax basket.
But the tax exemption by 80 C is limited to a maximum investment of ₹ 1.5 lacs.
Tax benefits of PPF after the maturity period:
You can enjoy the tax benefits even after the maturity period of 15 years if you choose the option to extend it with or without fresh contribution under section 80 C limitations (< ₹ 1.5 Lacs).
A PPF account will mature at the end of the 15th year. This can be extended for one or more blocks of 5 years thereafter.
There is common confusion about the maturity period of the PPF. For example: If you open a PPF account on 20th June 2020 most people think their PPF matures exactly after 15 years, on 20th June 2035.
But your PPF will actually mature on 1st April of 2036. (a PPF matures only at the beginning of the subsequent financial year after the completion of 15 years)
In order to extend the PPF account without a fresh contribution, you need not do anything. The account gets extended automatically for the next set of 5 years.
Interest will be earned for the existing balance for the next 5 years. Once the PPF account is continued without a minimum deposit for more than a year, you cannot make a deposit to that account for the next 5 years.
In order to extend the PPF account with a fresh contribution, you need to intimate the Accounts Office within one year after maturity along with a filled-in Form-H.
If you keep making deposits after maturity without intimation through Form-H, then your account will be treated as irregular and no interest will be paid.
What are the three options available on the maturity of the PPF account?
Yes. You can withdraw from the 7th year. However, you can withdraw only up to 50% of the balance at the end of the 4th year or 50% of the balance at the end of the immediately preceding year whichever is lower. You are allowed to withdraw only once in a year.
How to withdraw from a PPF account in case of an emergency?
After completion of the 5th year, you can close the PPF account in case of emergency situations like,
Documents required to withdraw from PPF account before maturity
Once your PPF is matured, you can close the account and withdraw the full amount from the account. Also, as we discussed earlier you can choose to extend the term of PPF for another 5 years with or without contribution.
The documents are required to withdraw the balance from the PPF account after maturity.
Yes. You can avail of the loan facility only from the 3 Financial years to the 6th Financial year. For example: if you opened a PPF account on 20th June 2020, (i.e. FY 2020-21) you can get a loan from 1st April 2022 (i.e. FY 2022-23) to 31st March 2026 (i.e. FY 2025-26).
You will be allowed to take a loan to the extent of 25% of the balance in the previous year.
However, you are allowed to take a loan only once in a year.
How to get a loan against my PPF account?
From the 3rd year to 6th year, you are eligible to apply for a loan against your PPF account.
The documents required to get a loan against the PPF account
PPF Loan Interest rate:
The interest rate for the loan against the PPF account is 2% above the PPF interest rate you receive.
PPF Loan Repayment:
The loan against PPF must be repaid within 36 months. After repayment, you can avail of a loan within the 6th Financial year. Even if you repay the loan in the same year, you cannot take another loan within the same year.
The 2019 notification about the NRI PPF account states that an NRI can’t open a new PPF account.
If you have opened a PPF account as a resident and subsequently you become an NRI, you will be allowed to continue and contribute until the maturity of 15 years on a non-repatriable basis.
The NRI PPF account holder cannot extend the tenure of the PPF.
How to Invest/deposit in an existing NRI PPF account?
If you hold a PPF account and have become an NRI during the tenure, you can continue to deposit/invest in the PPF account through your Non-Resident Ordinary or Nonresident External (NRO/NRE) account.
PPF account in case of death
In the event of the death of the PPF account holder, the balance amount in the PPF account will be paid to the nominee or legal heir of the deceased person even before the completion of 15 years.
The death benefit from the PPF account is the contributions made along with the accrued interest
Even after the account holder’s death, PPF accounts continue to earn interest in accordance with the conditions until the money is claimed.
The nominee or the legal heir is not allowed to continue the PPF account by making fresh contributions to it.
Is the PPF amount received by the nominee taxable?
No, the PPF amount received by the nominee is not taxable.
Documents required for death claim from PPF account:
After the death of the PPF account holder, the account needs to be properly closed to avoid legal action. The below-mentioned documents are required for a death claim from the PPF account.
What if the account holder died before maturity without a nominee?
If the account holder died without mentioning a nominee and if the eligible money does not exceed Rs. 5 Lakh, then the authorized officer of the accounting office or the authority specified by the Institution to which the accounts office belongs can pay the same to the rightful legal-hire.
Rightful legal hire can use Form-11 and the following documents to claim the money.
For PPF amount withdrawal in case of the death of the account holder,
Documents needed for PPF Death Claim procedure:
If the eligible money exceeds Rs. 5 Lakh, the claimant can submit a “Succession Certificate” for the PPF account, issued by the court along with the following documents to the Accounts office and claim the amount.
Documents needed for PPF Death Claim procedure (above 5 lacs):
PPF deceased Claim Form(pdf) SBI
Nomination is not allowed for an account opened on behalf of a minor. You cannot make a Trust as your nominee.
If a PPF account holder dies before maturity, is the account transferable?
The nominee cannot continue the account in his or her own name in the event of the death of the account holder.
The nominee can only collect the accrued amount on the death of the subscriber but is not allowed to continue contributing to the PPF account, because a PPF account is not transferable.
If the nomination is not mentioned in the PPF account, then the balance amount goes to the legal heirs or holders of the succession certificate.
According to the Law of Succession, if the nominee is not the legal heir, then the nominee can only act as a trustee for the benefit of the legal heirs or the holder of the succession certificate.
The nominee cannot resist handover the amount to the legal heirs.
How many nominees can be in a PPF account?
A person can add four nominees when he/she opens a PPF account. You can add or remove nominations at any time during the tenure period of the PPF(free of cost).
In case of multiple nominees, you should mention the % of the share for each nominee. If the share % is not mentioned, then the amount will be shared EQUALLY.
Also, if any one of the nominees died, other survivors can claim the amount by submitting his death certificate during the claim. And the share will be shared with the surviving nominees equally.
With the above points, you could have got a clear review of PPF. PPF is an excellent tax-saving option . It needs to be part of your tax-saving investment or not, depending upon your overall tax plan and asset allocation for the current year.
Do your tax plan and check PPF fits into your tax plan in the current year.
What do you think about investing in PPF? If you have any queries about this article let us know through the comment section.
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View Comments
My mother expired in March 2008. My father was a nominee who also expired in 2011. There are no nominees and the amount is over 6 lacs.
We are five siblings who are legal heirs. How do we claim the PPF . your guidance will be grateful and a big help please.
As a nominee of my grandfather's PFF. On his death the amount received by me is Taxable or Not??
It is not taxable.
Thanks for sharing these tips.
As per article - nomination is not allowed to an account opened on behalf of minors.
In the event of death of minor, who gets the money? Can ppf account be transferred to the guardian who opened the account on behalf of minor?
Is the minor's PPF account supposed to be linked to the guardians bank account. On the passbook should the parent or guardian who opened the account on behalf of minor be mentioned with their account number, especially if they also avail the 80C facility on depositing to the PPF.
The minor's parents or guardian can claim the money by providing the necessary documents.
My father was account holder of PPF account in SBI. Now he is misplaced since last three months. His closing balance was Rs.10 lac (+) as on 31.03.2021.
Kindly confirm how his nominee (my mother) calim the money ?
"In the event of the death of the PPF account holder, the balance amount in the PPF account will be paid to the nominee or legal heir of the deceased person even before the completion of 15 years.
The death benefit from the PPF account is the contributions made along with the accrued interest
The nominee or the legal heir is not allowed to continue the PPF account by making fresh contributions to it.
Documents required for death claim from PPF account:
After the death of PPF account holder, the account needs to be properly closed to avoid legal action. The below mentioned documents are required for death claim from PPF account.
Form-G filled by all nominees.
Death certificate of the PPF account holder.
Passbook of the PPF account holder."
Haiiii, my brother passed away in May 2021 and his PPF account will kutte in 2025. Shall we withdraw the money or can we keep the money in the same account. Yes we will not contribute to this account but shall we get the benefit of interest till 2021 or will get the interest till 2025.
"Hi!
In the event of the death of the PPF account holder, the balance amount in the PPF account will be paid to the nominee or legal heir of the deceased person even before the completion of 15 years.
The death benefit from the PPF account is the contributions made along with the accrued interest
The nominee or the legal heir is not allowed to continue the PPF account by making fresh contributions to it."
Can ppf account can still be got extended after 3 extensions of 5 years each. If not then what is advised.
Hi! You can extend it by a block of five years at a time as many times as you want as there is no limit on the number of times you can extend your PPF account.
May mother is account holder in ppf. My father is nominee. We are two brother but nominee is one. So can I get full amt..
If your brother doesn't have any objection, so yes, you can have full claim.
Ppf account holder, my younger brother got expired. He doesn't have any kids or even a wife, what would happen next? Or what can I do from my side?
According to Hindu Succession Act, the account holder's father/Mother/Brother is eligible to claim the amount. The first stepis to get a legal heir certificate.
After the death of the PPF subscriber, can the nominee get the transfer of proceeds to his own PPF account?
Aftet the death of the PPF account holder, nominee cannot transfer the PPF account.
My father died on january 2011. Can i claim my father's ppf.
As a legal heir, yes you can claim your father's PPF along with the other legal heirs.
I have my ppf account in post office. I want to transfer it in SBI. Today is 12th june 2021. After transfer of account at the end of year 2021- 22 will I get interest for whole year from SBI or only 9 month interest from SBI. Will there be an interest loss during transition period if transfer of account takes place after 5th date of the month?
"The usual transfer process will take up to one month.
Though transferring of PPF account requires you to undergo the KYC process, the transfer of account will be considered as a continuing account. Hence, all benefits such as interest earned, premature withdrawal, loan facility will not be affected.
A new PPF passbook will be issued to you and your outstanding balance will be shown as a credit of balance transfer. It is advisable to take a photocopy of the old passbook for record of old transactions."