Quick Guide To Public Provident Funds

A long-term saving system endorsed by the Indian government is the public provident fund, which was established in 1968. Nothing beats the PPF system in terms of safety, security, and dependability. It can be opened by almost any Indian citizen, whether a minor, a housewife, or an elderly person, making it the most versatile of all. Salaried people who already have EPF but want to go the extra mile can also open it. However, NRIs are not permitted to use these services.

How to Open a Public Provident Fund (PPF)?

A PPF account can be opened at a bank or a post office. Some banks also offer this service online. Submit the completed application together with your KYC and the required cash, and you'll have your account opened in no time. An individual, on the other hand, is only allowed to open one account. Avoid opening two accounts because one will be viewed as irregular, and merging these two accounts is a time-consuming process. You must begin by writing to the Ministry of Finance and following the instructions. Your PPF account can be freely transferred from bank to post office and vice versa.

An account for a minor can be opened by either the mother or the father, but not both. If the minor's parents are deceased, the legal guardian may assume responsibility. It is important to remember that a PPF account cannot be formed in joint names; otherwise, it will be considered irregular and cancelled. However, you can name someone as a nominee in your PPF account.

Can You Get A Loan Against Your Public Provident Fund (PPF) Account?

A loan can be acquired from the third to the sixth fiscal year, but not beyond that. You can only borrow up to one-quarter of the money you have in your PPF account as of the preceding year's end. Within the next three years, you must repay the principal part of your borrowed funds. Furthermore, the interest rate on loans will be two per cent higher than the interest rate on balance in your PPF account.

Must read: Is PPF Better Than Life Insurance?    

Can You Withdraw Money From Your Public Provident Fund (PPF) Account?

From the seventh financial year forward, one is eligible for a withdrawal. The amount eligible for withdrawal is between 50% of the available balance at the end of the fourth year immediately preceding the withdrawal year, or 50% of the balance remained at the end of the previous year, whichever is lower. After the 15-year maturity period has passed, you will be able to withdraw your whole investment. You can wait another five years before making a complete withdrawal if you still want to keep your investment intact.

Can Your Public Provident Fund (PPF) Account Lapse?

If you do not make a minimum contribution of Rs 500 in a year, your PPF account may be closed. If your PPF account is closed, you will receive the amount invested plus interest, but only once the lock-in period has expired. Every year until maturity, the terminated account will earn interest. If your PPF account has been closed, you are not eligible for withdrawal borrowing. To use such services, you must keep your account active by paying the stipulated penalty and minimum subscription for the period in question. So, to keep your PPF account functioning, make sure you invest the requisite amount each year.

Take Away

Despite the abundance of savings options, PPF appears to be tailor-made for the majority of risk-averse Indians who are frightened of the stock market. This is due to the fact that PPF is a debt-oriented asset class, and its returns are unrelated to stock market performance. Furthermore, starting a PPF account is straightforward, painless, and quick. It doesn't get any better than that, especially since it's tax-free. It goes without saying that it is the best investment product available to ordinary people.

Also read: How to Reactivate an Inactive PPF Account?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.