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What is Public Provident Fund (PPF) Account?

PPF Account or Public Provident Fund is a financial instrument that allows users to save a sufficient amount of money, which can be received along with the interest earned on maturity. The PPF system was introduced in 1968 by the Finance Ministry’s National Savings Institute. It aims to help users save each year to build a retirement corpus. In short, a PPF account is a long-term savings and investment vehicle, as well as an investment for savings and tax savings.

There is a lot to learn about the PPF account, including its benefits, payment rules, and other details. Let’s take a closer look.

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What is Public Provident Fund (PPF) Account?

With a PPF (Public Provident Fund), you can save a portion of your income each year to build your retirement plan while earning competitive interest on your savings and receiving tax benefits. PPF was created to encourage people to save, especially those not affiliated with an Employee Provident Fund Organization (EPFO). PPF offers a current interest rate of 7.1% compounded annually. In addition, the maximum contribution to the PPF scheme is Rs 1,50,000/- and the interest earned on the deposit amount and unpaid amount under section 80C of IT also allows for triple tax benefits under the PPF scheme.

Importance of Public Provident Fund (PPF) Account

Public Provident Funds are best suited for those who are less willing to take risks. As the scheme is mandated by the government, it is backed by guaranteed revenues to protect the financial needs of the Indian masses. In addition, the funds invested in the PPF account are also non-market linked.

Investors can also diversify their financial and investment portfolios using the Public Provident Fund Scheme. During recessions, PPF accounts can provide stable annual returns.

Features of Public Provident Fund (PPF) Account

Interest Rates:

  • Interest rates on PPF accounts are regulated by the Government of India on a quarterly basis.
  • The current interest rate for PPF accounts is 7.1% per annum.
  • The interest rate is calculated monthly on the lower limit of his PPF account balance from the 5th to the last day of each month.
  • It is recommended to contribute by the 5th of each month to your PPF account.

Lock-in Period

  • The minimum contract term for PPF is 15 years. One can withdraw the full amount of the legal entity after 15 years.
  • The invested amount can be kept in PPF account for a long time without any additional contributions being made.
  • After the 15-year lockup period, there are no restrictions on retaining the amount invested in the fund.
  • Early withdrawals are allowed, but only in very urgent and emergency cases. In this case, you will need to submit the required documents and information.


  • Individuals should invest at least Rs. 500
  • A maximum of INR 1,50,000 can be credited to a PPF account in one financial year.
  • Donations over Rs 1.5 lakh will be automatically rejected.
  • Deposits can be made in cash, check, draft, or online.


  • PPF account holders may designate multiple beneficiaries. If you nominate one or more people, you must specify a percentage of all candidates.
  • There is no nomination option on the PPF account for minors.


  • PPF account holders are eligible for loans based on the balance of their PPF account.
  • It can be used from the 3rd year & 6th year after opening an account.
  • Interest will be charged at an annual rate of 2% on the amount borrowed.
  • You must first repay the principal within 36 months from the first day of the month following the borrowing month.
  • The principal can be paid in a lump sum or in two or more monthly installments.
  • If the principal is not repaid within 36 months, interest will accrue at 6% per annum.
  • When obtaining a loan against a PPF account, a person does not receive interest until the loan amount is repaid.
  • You can take out another loan only when the first loan is paid off.

Opening Balance

  • Accounts can be opened from Rs 100 per month. Annual investments over Rs 1,50,000 do not earn interest and are not tax deductible.

Deposit Frequency

  • Deposits into the PPF account must be made at least once a year for 15 years.

Mode of Deposit

  • You can deposit funds into your PPF account by cash, check, demand draft (DD), or online money transfer.

Joint Accounts

  • A PPF account can only be held in one person’s name. Joint account opening is not permitted.

Risk Factor

  • PPF is backed by the Government of India, which guarantees risk-free returns and provides full capital protection. The risk factor associated with holding a PPF account is minimal. PPF accounts have a fixed return and are used as a diversification tool for an investor’s portfolio.

Tax Exemption

  • Interest and accruals on PPF are tax-exempt under section 80C of the Income Tax Act of 1961.

Partial Withdrawal

  • The PPF amount can be partially withdrawn from the 7th fiscal year.

PPF Account Eligibility

  • Any Indian citizen can invest in PPF.
  • A Citizen can only have one PPF account for him/her unless the second account is in the minor’s name.
  • NRIs and HUFs are not eligible to open PPF accounts. However, if you have an existing PPF account in that name, that account will remain active until the closing date.

How to open a Public Provident Fund (PPF) Account?

PPF accounts can be opened at post offices or state banks such as the State Bank of India or Punjab National Bank. Even certain commercial banks such as ICICI, HDFC, and Axis Bank are now allowed to offer this feature.

You will need to submit the following documents:

  • Duly completed account opening application form
  • Aadhaar, Voter ID, and Driving License for KYC documents.
  • Address proof
  • Declaration Form for Nominee
  • Latest Passport Size Photo

Interest Rate on a Public Provident Fund (PPF) Account

Interest payments on the PPF Account are set by the Central Government of India. It aims to offer higher interest rates than regular accounts maintained by various commercial banks in the country. The interest rate currently paid on such accounts is 7.1% and will be renewed quarterly at the Government’s discretion.

How to close a Public Provident Fund (PPF) Account?

  • The Public Provident Fund Account rules state that once the PPF Account has expired (15 years), the balance of the Public Provident Fund Account can be withdrawn.
  • After the expiration of your 15-year term, you will be able to view and withdraw your public pension fund account balances.
  • You cannot withdraw the entire account from the Public Provident Fund before the full term of the account expires.
  • After 5 years of the statutory health insurance period, it is possible to cancel the statutory health insurance up to 50% of the account balance.

Premature Closure of a Public Provident Fund (PPF) Account

After five years, individuals may choose early closure. However, early closure is permitted to treat a medical condition that may endanger the life of the PPF account holder, a parent, child, or spouse. For this purpose, documentation from an accredited medical institution must be presented.

Early closure is permitted if the account holder is a minor or for the account holder’s higher education. However, you will need to submit documents such as an invoice for fees and confirmation of admission from an accredited university in India or abroad.

Conclusion on Public Provident Fund (PPF)

A PPF account is a great investment option as it allows individuals to build a bonus corpus. Before donating to PPF, we encourage you to learn everything you need to know about PPF, including its benefits, limits, deposit size, and more.

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FAQs on Public Provident Fund (PPF)

What is Public Provident Fund (PPF) Account?

PPF or Public Provident Fund is a long-term fixed-income savings scheme offered by the Government of India. It offers fixed and guaranteed earnings as well as tax incentives. This is one of the tax-saving tools under Section 80C of the old regime of the Income Tax Act.

What is Public Provident Fund (PPF) Interest Rate?

Traditionally, PPF rates have been kept higher than typical fixed deposit rates offered by banks to encourage savings by Indian households for their long-term future. The current interest rate for the fourth quarter (January-March) of 2022-23 for PPF accounts is set at 7.1%.

How many Public Provident Fund (PPF) accounts can one have?

An individual can only open one PPF account in the country, either at a bank or post office.

What is the minimum lock-in period for a Public Provident Fund (PPF) investment?

The actual term of the PPF account is 15 years, which is the minimum commitment term for PPF account.

Can I close my Public Provident Fund (PPF) account before 15 years?

An individual can only close his/her PPF account after 5 years. In addition, certain requirements must be met in order to close your account.