The applicable Public Provident Fund interest rate in the fiscal year 2018-19 is 8.0% per annum. Needless to say, in your personal finance portfolio, PPF is one of the safest investments you can make in India. This is because PPF investment is backed by the government of India (GOI).
What Is Public Provident Fund (PPF) Investment?
Public Provident Fund or PPF comes with a fixed investment period of 15 years. This also means that the maturity date of your PPF account will be 15 years after our open it.
The Public Provident Fund interest rate applicable may change multiple times.
If you’re reading this article, you probably already have a Public Provident Account. If it’s about to get matured in 2019 or 2020, you do have an option to extend the investment for another block of 5 years. Besides, and you can get the return on investment subject to the applicable Public Provident Fund interest rate.
In fact, you are allowed to extend your PPF account multiple times in blocks of 5 years.
PPF Account Features
Public Provident Fund or PPF is an investment scheme backed by the Central Government. Anyone can voluntarily open a PPF account at any of the nationalized public sector banks, selected authorized private sector banks, and all India Post Offices across the country.
Anyone, including minors, can leverage the dynamic Public Provident Fund interest rate with assured, secured investment.
Here are some key featured of a PPF account:
- The minimum annual deposit applicable to a PPF account is Rs. 500 only.
- The current PPF interest rate applicable is 8.0% per annum.
- A 15-year lock-in period is applicable to a PPF account, starting from the account opening date.
- No more than 12 transactions are allowed in a PPF account per financial year.
- Both the interest earned and maturity amount are tax-free.
- Partial withdrawals are allowed only after the completion of the 6th investment year.
- The interest earned on a PPF account is compounded annually.
How To Open PPF Account?
You can open a PPF account with an amount as low as Rs. 500. The maximum amount you can deposit in your PPF account in a financial year is Rs. 1.5 Lakh under section 80C of the Income Tax Act, 1961.
Below is a list of banks that facilitate opening a PPF account, and the Public Provident Fund interest rate remains the same across all banks.
Disclaimer: While not all branches of these banks accept PPF account opening forms, you can visit any of these banks ask about their branch that features the service of a PPF account.
Public Provident Fund Interest Rate History
The PPF or Public Provident Fund interest rate is subject to change and the Ministry of Finance, an important ministry of GOI, announces the applicable Public Provident Fund rate of interest every quarter.
The table below shows the PPF interest rate history:
Public Provident Fund (PPF) Maturity Options
Although you know (by now) that the PPF maturity period is 15 years from the date of starting investment, you are provided with 3 options once the PPF maturity period is over.
1. Withdraw the complete amount
As soon as your PPF account matures, you can withdraw the corpus and the entire amount (both interest and maturity amount) are tax-free.
2. Extend PPF account with a contribution
If you choose this option, you need to put money in your existing PPF account. To Still reap the benefits of Public Provident Fund interest rate, you have to submit Form H to the bank within one year from the PPF maturity date (i.e. before the completion of the 16th year).
However, you reserve the right to withdraw up to 60% of the amount in your PPF account within the block of 5 years. Only a single withdrawal is allowed in a year.
3. Extend PPF account with no further contribution
If you choose to go with this option, you don’t need to put any further amount in your PPF account after maturity. In fact, this option is auto-applied by the bank (for a block of 5 years) if you don’t withdraw all or a part of the PPF maturity amount at maturity.
The only catch here is that only one withdrawal is allowed in a year while the remaining amount keeps earning interest as per the current PPF interest rate applicable.
Loan Against PPF Account
You can take a loan against PPF account starting from the 3rd financial year up to the 5th financial year. The rate of interest applicable to a loan against PPF account as on or after 1 December 2011 shall be 2% more than the current applicable Public Provident Fund interest rate.
However, any loan against PPF taken on or before 30 November 2013 associates only 1% more than the current applicable PPF interest rate.
The maximum amount you can take as a loan against PPF is 25% of the account balance at the end of the 2nd year. The time to repay the loan amount is to be returned within the next 36 months.
You can take the 2nd loan against your PPF account between a period of the 3rd year and 6th year, but only if the first loan has been repaid in full. No loan against PPF is allowed once the account becomes eligible for partial withdrawals.
Any discontinue or inactive PPF account isn’t eligible for a loan.
Partial Withdrawals From PPC Account
According to the State Bank of India website
PPF Interest Rate Calculator
The PPF interest rate calculator is an online tool that allows you to quickly calculate interest earned and the maturity amount.
All you need to do is enter the amount in PPF calculator, which you are willing to contribute in a year and there you go. The current interest rate is auto-applied and you will see the annual interest to be earned on that amount along with the updated PPF balance to be available in your account on 31st March.
It’s that simple.
Public Provident Fund (PPF) – FAQs
Q1. Can I open multiple (more than one) PPF accounts?
A1. You can open only one PPF account under your name but can maintain another PPF account open on behalf of a minor individual.
Q2. What are the documents required for opening a PPF account?
A2. The following are the documents required for opening a PPF account:
- PPF account opening form
- Nomination form
- A copy of your PAN card
- Passport size photograph
- KYC documents – ID proof and Address proof
Q3. What are the minimum and maximum amounts that I can deposit in a PPF account?
A3. The minimum and maximum amounts that you can deposit in a PPF account are Rs. 500 and Rs. 1.6 Lakh in a financial year.
Q4. What is the maturity period of a PPF account?
A4. A PPF account comes with a maturity period of 15 years.
Q5. Can I extend the tenure of my PPF account beyond the maturity period?
A5. Yes, you can extend the tenure of your PPF account beyond the maturity period for another 5 years within a year after maturity. You can do this multiple times and earn the interest applicable.