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Public Provident Fund | What is PPF & Why Invest in It?

Know Everything about Public Provident Fund and Why You Should Invest in it

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Investment plans are designed to save and grow your hard-earned money so that you can ensure the financial security of your loved ones and for yourself. Among the various investment plans currently available in India, Public Provident Fund or PPF is one of the most popular tax saving investments in India. Yet, many of us don't really have a comprehensive knowledge of what PPF is and its benefits. To help you out, we have prepared a conclusive guide that talks about what a PPF account is, how to open it, its benefits and who is eligible for making this investment. 

Let us start by understanding what is PPF account?

What is PPF Account?

Before you plan on investing, it is important to know all about what is PPF account and how it works. Public Provident Fund or PPF was introduced in 1968 and it is still one of the popular long-term investment plans in India. This is an ideal plan for all those looking to achieve their long-term goals and planning to create a financial corpus for their retirement. This plan comes with a lock-in period of 15 years, though the investor can make partial withdrawals after the 7th year of the policy.

Now that you know what is PPF account, let us now look at a few benefits of investing in the Public Provident Fund investment plan.

Benefits & Features of Public Provident Fund or PPF 

Numerous reasons make Public Provident Fund Investment Plan an ideal long-term investment plan. Some of the benefits of the PPF plan are mentioned below.

1. Financial Security

One of the key benefits of investing in the PPF investment plan is that it provides financial security to you and your loved ones. In the worst-case scenarios, if you meet an untimely and unfortunate demise and are not there to provide financial backup to your family, the PPF investment plan will ensure that they are financially secure and can manage their lives without hassles.

2. Tax Benefits

Another key benefit of investing in the PPF investment plan are the tax benefits it offers. The PPF subscriber can claim up to Rs. 1.5 lakhs in tax deduction benefits on investments made in a financial year under Section 80C of the Income Tax Act, 1961. Moreover, the interest earned by the subscriber is also exempt from tax.

3. Your Retirement is Secure

When we retire, we want to enjoy our golden years with our loved ones without having to face any financial hassles. Investing in the PPF investment plan helps ensure that you are financially secure even after you retire. 

4. Provision of Loan Against Your PPF Account

We never know when we might face a financial emergency and might have to take a loan. Those who have invested in the PPF investment plan can opt for a loan against this policy during the 3rd and the 6th year of the policy. The maximum amount of loan you can avail of is 25% of the total amount available at the end of the 2nd year of opening the PPF account. This facility is beneficial for investors who are looking for loans for short-term financial requirements. Another benefit of this facility is that it helps you secure your valuable assets, such as your house and car, and ensure that you do not have to take a loan using your assets as security. 

4. Provision of Loan Against Your PPF Account

We never know when we might face a financial emergency and might have to take a loan. Those who have invested in the PPF investment plan can opt for a loan against this policy during the 3rd and the 6th year of the policy. The maximum amount of loan you can avail of is 25% of the total amount available at the end of the 2nd year of opening the PPF account. This facility is beneficial for investors who are looking for loans for short-term financial requirements. Another benefit of this facility is that it helps you secure your valuable assets, such as your house and car, and ensure that you do not have to take a loan using your assets as security. 

How to Open a PPF Account 

You can open a PPF account via either the online or offline. The traditional offline method involves visiting your nearby bank branch or India Post Office to fill out and submit the PPF account opening form along with applicable KYC documents. However, these days you can open a PPF account online from the comfort of your home.

Mentioned below are the key steps you need to complete in order to open your Public Provident Fund Account online:      

1. Sign In

The first step toward opening your PPF account is to sign into your bank account. Currently public sector banks as well as a few top private sectors banks allow you to open a PPF account. After logging into your bank account, click on the tab which offers the accountholder to open the PPF account

2. Fill in Your Details

After clicking on the tab, you will be redirected to a new page wherein you will have to fill in your personal details, such as name, age, address, PAN, Aadhaar, etc.

3. Verify Your Details

The next step is to verify the details you have provided and then click on proceed.

4. Your Account Will Be Created

After you verify your details, your PPF account will be created, and your account number will be displayed.

5. KYC of the PPF Account

After your account has been created, visit your bank branch to get the KYC done of your PPF within 30 days of registration for the process to move forward. 

Who is Eligible to invest in Public Provident Fund Investment Plan? 

1. Any Indian citizen can open the Public Provident Fund investment account under his/her name or on behalf of a minor.

2. However, you must remember that you cannot open a joint account for PPF, though you can add a nominee such as your spouse, parents, or children. 

You now have comprehensive information on what is PPF account, its features and benefits and who are eligible to open a PPF account. Investing in the PPF investment plan will make sure that you and your family live a peaceful life and do not face any financial hassles. Moreover, by making PPF investments you will be able to achieve various long-term goals, such as a child's education and marriage, buying a house, etc, with ease.

1. Any Indian citizen can open the Public Provident Fund investment account under his/her name or on behalf of a minor.

2. However, you must remember that you cannot open a joint account for PPF, though you can add a nominee such as your spouse, parents, or children. 

You now have comprehensive information on what is PPF account, its features and benefits and who are eligible to open a PPF account. Investing in the PPF investment plan will make sure that you and your family live a peaceful life and do not face any financial hassles. Moreover, by making PPF investments you will be able to achieve various long-term goals, such as a child's education and marriage, buying a house, etc, with ease.

FAQs

Q1. What is a PPF Account?

It is very important to have in-depth knowledge about what a PPF account is before you actually invest in it. Public Provident Fund or PPF is one of the popular long-term investment plans in India. The Finance Ministry's National Savings Institute offered the provision to invest in Public Provident Fund Plan in 1968. This is an ideal plan for all those who are looking to achieve their long-term goals and plan a financial corpus for their retirement period. This plan comes with a lock-in period of 15 years, though the investor can make partial withdrawals after the 7th year of the policy.

Q2. What are the benefits of investing in the Public Provident Fund or PPF?

Few benefits of investing in the Public Provident Fund investment plan are as follows -

1. Financial security for you and your loved ones

2. Tax saving benefits

3. Your retirement is financially secure

4. Provision of loan against your PPF account balance

5. Option of partial withdrawal and premature closure of account subject to applicable terms and conditions

Q3. What is the provision of a loan under the Provident Fund Investment Plan?

We never know when we might face a financial emergency and might have to take a loan or debt. Those who have invested in the PPF investment plan can opt for a loan against their plan during the 3rd and 6th year of the investment. This facility is beneficial for investors who are looking for loans for short-term financial requirements. Another benefit of this facility is that it helps you secure your valuable assets, such as your house and car, and ensure that you do not have to take a loan against these assets.

Q4. Can the PPF account be handled jointly between my wife and me?

No, the Public Provident Fund or PPF account, cannot be handled jointly between you and your wife. However, you can make your wife a nominee of your PPF account.

Q5. What are the tax benefits you can claim under the PPF investment plan?

The PPF subscriber can claim up to Rs. 1.5 lakh in tax deduction benefits in one financial year under Section 80C of the Income Tax Act, 1961. Moreover, the interest earned from PPF is also tax-free.

Q6. What is the Rate of Interest for the Public Provident Fund Investment Plan?

The rate of interest for the Public Provident Fund or PPF investment plan is 7.1% per annum for the quarter ending on 30th June 2022. 

Sources:

https://www.bankofbaroda.in/personal-banking/accounts/baroda-public-provident-fund

https://economictimes.indiatimes.com/wealth/invest/latest-public-provident-fund-ppf-interest-rate/articleshow/90489151.cms

https://economictimes.indiatimes.com/wealth/invest/how-to-open-ppf-account-online/articleshow/63854944.cms 

https://www.axisbank.com/retail/investment/public-provident-fund-ppf/eligibility-documentations

https://economictimes.indiatimes.com/wealth/borrow/understanding-rules-for-ppf-withdrawals-loans-and-premature-closure/articleshow/61571195.cms

ARN No: May22/Bg/26A

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