Public Provident Fund (India)

From Wikipedia, the free encyclopedia
  (Redirected from Public Provident Fund)
Jump to: navigation, search


Individuals who are residents of India are eligible to open their account under the Public Provident Fund scheme. A PPF account may be opened under the name of a minor by his/her legal guardian. However, each person is eligible for only one account under his/her name.

Non-resident Indians (NRIs) are not eligible to open an account under the Public Provident Fund Scheme. However a resident who becomes an NRI during the 5 years' tenure prescribed under Public Provident Fund Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation basis. Deposit to PPF is tax deductible for individual assessees in India u/s 80C of Income Tax Act, 1961.

Investment and returns[edit]

A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account, and a maximum deposit of Rs.150000/ can be made in a PPF account in any given financial year.

The government of India decides the rate of interest for PPF account. The current interest rate effective from 1 April 2013 is 8.7% Per Annum(compounded annually).[1] Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.


Loan facility available from 3rd financial year up to 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% more than the prevailing interest on PPF. However, the rate of interest of 1% more than PPF interest p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011.


The public provident fund is established by the central government. One can voluntarily open an account with any nationalized bank,selected authorized private bank or post office. The account can be opened in the name of individuals including minor.

The minimum amount is Rs.500 which can be deposited. The rate of interest at present is 8.7% per annum, which is also tax-free. The entire balance can be withdrawn on maturity. Interest received is tax free. The maximum amount which can be deposited every year is Rs. 1,50,000 in an account. The interest earned on the PPF subscription is compounded. All the balance that accumulates over time is exempt from wealth tax. Moreover, it has low risk – risk attached is Government risk. PPF is available at post offices and banks.

Withdrawals from PPF account[edit]

There is a lock-in period of 15 years and the money can be withdrawn in whole after its maturity period. However, pre-mature withdrawals can be made from the end of the sixth financial year from when the PPF commenced. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.

After 15 years of maturity, full PPF amount can be withdrawn and all is tax free, including the interest amount as well.

PPF defaults and revival[edit]

If any contribution of minimum amount in any year is not invested then the account will be deactivated. To activate you need to pay Rs.50 as penalty for each inactive year also you need to pay Rs.500 for each inactive year’s contribution.

In case death of account holder then the balance amount will be paid to his nominee or legal heir even before 5 years too. So nominees or legal heirs are not eligible to continue the deceased account.

If balance amount is more than Rs.1,00,000 then deceased nominee or legal heir has to prove the identity to claim the amount.

PPF tax concessions[edit]

Interest earned is fully exempted from tax without any limit. Annual contributions qualify for tax rebate under Section 80C of income tax. Contributions to PPF accounts of the spouse and children are also eligible for tax deduction. Balance in PPF account is not subject to attachment under any order or decree of court. But, Income Tax authorities can attach the account for recovering tax dues. The highest amount that can be deposited is 1,50,000. Tax bracket for PPF is EEE (i.e. Exempt,Exempt,Exempt). So contribution is exempted under 80C, Interest earned is tax exempted and withdrawal is also tax exempted

One can withdraw the investment made in 1st year only in 7th year. However, loan against investment is available from 3rd financial year.

Interest rates over time [2][edit]

From To Interest Rate
1952 1955 4%
1955 1957 3.5%
1957 1963 3.75%
1963 1964 4%
1964 1965 4.55%
1965 1966 4.5%
1966 1967 4.75%
1967 1968 5%
1968 1969 5.25%
1969 1970 5.5%
1970 1971 5.7%
1971 1972 5.8%
1972 1974 6%
1974 1975 6.5%
1975 1976 7%
1976 1977 7.5%
1977 1978 8%
1978 1979 8.25% + 0.5%
1979 1981 8.25%
1981 1982 8.5%
1982 1983 8.75%
1983 1984 9.15%
1984 1985 9.9%
1985 1986 10.15%
1986 1987 11%
1987 1988 11.5%
1988 1989 11.8%
1989 2001 12%
2001 2005 9.5%
2005 2010 8.5%
2010 2011 9.5%
2011 2012 8.6%
2012 2013 8.8%
2013 2014 8.7%
2014 2015 8.7%


See also[edit]


External links[edit]