PPF Account Benefits

Imagine you have a hidden box where you can keep your money safe, and over time, it grows all by itself! That is kind of how a PPF account works. The Public Provident Fund (PPF) is a special savings plan backed by the government that not only helps you save money but also makes it grow in the long run. And the best part? The government helps you protect this money and lets you keep this amount to use for future goals.

Since PPF benefits have always been seen as one of the safest and most rewarding ones in India, it is best for you to explore what is PPF account and its benefits in detail.

What is a Public Provident Fund?

As we briefly explored, a Public Provident Fund, or PPF, is a long-term savings scheme offered by the government of India that helps you save and grow money over time. Now, imagine you put a little money into your savings every month, and over the years, it keeps getting bigger because the government gives you extra money (called interest) to save it. Interesting right?

Well, it is, in fact, that interesting!

When you put money into a PPF account, the government adds extra money to it every year as interest. This amount gets locked in for a tenure of 15 years, and during that time, it earns at a rate set by the government. One of the biggest advantages of PPF account is that it is highly safe, and the money you save in it grows without you worrying about losing it. To top off all these PPF account benefits, you do not have to pay taxes on the money you earn from it. You can simply keep adding money to your PPF account for many years, and when you require it, you can use this money later for important things like retirement, education, or buying a home while enjoying tax benefits.

What are PPF Account Benefits?

You must already know by now how PPF works. It meets the needs of investors who avoid risks and want steady returns by providing financial security along with several other benefits. Let us explore the many PPF account benefits further.

PPF Interest Rate 2024

You briefly explored how the government provides you extra money on your savings in a PPF. This interest rate changes every few months, and in 2024, the PPF interest rate remains profitable for investors, providing steady investment growth with a current rate of 7.1%. While the PPF interest rate changes from time to time, it always gives good returns, making it a great option for long-term savings.

Low-Risk Investment with Guaranteed Returns

You know how you might get nervous about losing your savings in certain investments? Well, one of the most compelling PPF account benefits is its low-risk nature and guaranteed returns. It is one of the safest investments backed by the Government of India. This means there is zero risk involved, and you also get protected from market fluctuations and uncertainties.

Extension of Tenure

So, the standard lock-in period for a PPF account is 15 years. But what if you do not need the money just yet? No worries! You can extend the tenure by another 5 years once it is completed. By extending in blocks of five years, you can continue to enjoy the PPF account benefits of tax-free returns and compounded growth.

Tax Benefits on PPF

This may be one of the best PPF benefits for many people. By investing in PPF, you can claim tax deductions under Section 80C of the Income Tax Act. Plus, the interest you earn and the final amount you get when the account matures are all tax-free. This makes the PPF scheme a smart choice if you want to save on taxes.

Investment Security in PPF

PPF accounts follow strict rules and are highly secure. Your money is protected by the government, meaning it is not going anywhere. This means you do not have to worry about market ups and downs affecting your savings.

Facility of Loans Against PPF

If you ever need money during an emergency, PPF has you covered. You can take a loan against the balance in your account without withdrawing it. From the 3rd year to the 6th year of your account, you can borrow up to 25% of the amount in your PPF without losing any benefits. This way, your savings continue to grow, and you still get the cash you need.

Partial Withdrawals

While the money in your PPF is locked in for 15 years, you do not need to wait that long if you need some cash. After 6 years, you can withdraw part of your money for important needs. Whether it is for education, a medical emergency, or buying a home, PPF allows you to access a part of your savings without any hassles.

PPF as a Pension Tool

PPF is a reliable pension tool, offering a steady income stream during your retirement years. By consistently saving in your PPF account, you build up a huge sum over 15 years or more. This can serve as a pension for you, giving you financial security when you no longer have a regular income.

Transparency in Calculation

Due to PPF account benefits, you always know how your money is growing. The government calculates the interest monthly but adds it to your account at the end of the year. So, there are no surprises. Moreover, you can easily track how much interest you are earning and how much your savings are growing.

Eligibility Criteria to Invest in PPF Account

Before investing in a PPF account, it is essential to understand the eligibility criteria governing this investment opportunity.

Citizenship

You must be an Indian citizen to invest in a PPF account. Unfortunately, if you are an NRI (Non-Resident Indian), this option will not be available for you. However, your existing accounts can still be maintained until maturity, subject to certain conditions.

Age Limit

The age criteria for opening a PPF account vary slightly depending on the rules governing the account holder:

• Any resident aged 18 years or above can open a PPF account in their name.

• Minors can also have a PPF account as long as their parents or guardians manage it for them. The minor’s age is considered when calculating the maturity period of the account.

Number of Accounts

While you can hold only one PPF account in your name, you can also be the guardian of a PPF account for a minor. However, the cumulative contribution to all PPF accounts (individual and guardian accounts) cannot exceed the prescribed annual limit.

Documentation

To open a PPF account, you are required to submit the following documents:

• Duly filled and signed the PPF account opening form.
• Proof of identity (e.g., Aadhaar card, passport, voter ID, PAN card).
• Proof of address (e.g., utility bill, bank statement, passport).
• Passport-size photographs.

Initial Deposit

Opening a PPF account requires an initial deposit, the minimum amount determined by the respective bank or post office where the account is opened. After that, you can keep adding as much as you want, but no more than ₹1.5 lakhs a year. You can either make one big payment or smaller ones throughout the year.

Steps to Open a PPF Account

So, after learning all about PPF account benefits and eligibility, you must be excited to start a PPF account. This is a great choice for your savings journey. Whether you are a tech-savvy person or prefer a traditional approach, opening a PPF account is easy. You can either do it online or offline by simply following these steps.

Online Mode

If you are more comfortable with online banking, you can open your PPF account right from your phone or computer. Most banks offer an easy online process where you can create your PPF account within minutes.

1. Log In: First, log in to your bank’s internet or mobile banking platform.
2. Find the Option: Look for an option that says “Open a PPF Account.” This is usually found in the menu under savings or investment options.
3. Choose Account Type: You will be asked whether you are opening the account for yourself or for a minor. Select “self account” if it is for you or “minor account” for someone else.
4. Fill the Form: Complete the online form with your details. Make sure all the information is correct to avoid any issues.
5. Verify with OTP: After you submit the form, you will get a One-Time Password (OTP) on your registered mobile number or email. Enter this OTP to verify your account.
6. Confirmation: Once verified, you will get a confirmation email saying your PPF account is successfully opened.

Offline Mode

If you prefer doing things the old-fashioned way and in person, you can visit your bank branch or the post office to open an account. Here is how:

1. Visit a Bank or Post Office: Head to your nearest bank branch or post office. Most banks and post offices offer PPF accounts.
2. Get the Form: Ask for a PPF account application form. You can usually find this at the customer service desk.
3. Complete the Form: Fill out the application form with your details. Make sure to sign it where required.
4. Submit Documents: Along with the completed form, you will need to provide some documents:

• Proof of Identity: Such as your Aadhar card, PAN card, driver’s license, or voter ID.
• Proof of Address: To confirm where you live.
• Nominee Declaration: A form to declare who will receive the amount in case of unforeseen circumstances.
• Passport-size Photos: A couple of recent photos for identification purposes.
• Initial Deposit: You will need to deposit a small amount of money to start your account.
1. Get Confirmation: After submitting all the documents and the form, you will receive a confirmation once your account is set up.

Key Takeaways

• The advantages of PPF accounts under Section 80C make the PPF a tax-efficient investment avenue.
• With attractive interest rates compounded annually, PPF accounts ensure steady investment growth.
• Backed by the government, PPF accounts provide unmatched safety and security for investors.
• PPF accounts help you save money steadily over time, making it easier to build wealth for the future.
• You can decide how much money to add to your PPF account based on what you can afford, making it flexible for everyone.

Conclusion

Investing in a PPF offers many PPF account benefits that can help you reach your financial goals. It offers great interest rates, is safe, and gives you tax advantages. Plus, it is flexible, making it a solid choice for long-term financial stability in today’s world.

Now that you know what is PPF account and its benefits, you can start saving for the future and build up your wealth over time. Considering all these perks, putting your money into a PPF account is a smart way to ensure a secure and successful financial future!

FAQs on PPF Account Benefits




1

What are the benefits of a PPF account?

• Tax PPF account benefits under Section 80C of the Income Tax Act.
• Attractive interest rates with compounding.
• Safety and security of investments backed by the government.
• Long-term wealth accumulation and retirement planning.





2

Can I extend the tenure of my PPF account for 3 years?

No, the tenure of a PPF account can be extended in blocks of 5 years after maturity.





3

What are the disadvantages of a PPF account?

• Limited liquidity with partial withdrawals permitted after certain years.
• Fixed interest rates that may not keep pace with inflation.
• The long lock-in period of 15 years.





4

How many times can I extend the tenure of my PPF account?

There is no limit. You can keep extending the tenure in 5-year blocks as long as you want.





5

Is it possible to close the PPF account if I cannot contribute to it?

Yes, a PPF account can be prematurely closed after the completion of 5 financial years, subject to certain conditions and penalties.





6

What is the lock-in period for a PPF account?

The lock-in period for a PPF account is 15 years, after which it can be extended indefinitely in blocks of 5 years.





7

How many PPF accounts can I open?

You can open only one PPF account in your name. However, you can also be the guardian of a PPF account for a minor.






8

How much PPF is tax-free?

All contributions, interest earned, and maturity proceeds from a PPF account are entirely tax-free under the Income Tax Act.

Suggested Readings

1. Single Premium ULIP or a PPF - Which One is Better?


2.PPF Withdrawal Rules & Premature Closure - A Complete Guide