Tax saving with Public Provident Fund(PPF)

There is still time left to park your money in Public Provident Fund this year and reap tax benefits. This section deals with certain aspects related to Public Provident Fund and also help you to know how to open a PPF account. This is one of the best avenues for investment with a long term view and moreover your money in PPF can not be attached even by a legal authority. The post gives you a brief summary of Provident Fund on Eligibility for Public Provident Fund, Subscription Limit for Public Provident Fund, How to open a Public Provident Fund account, Nomination of Public Provident Fund, Interest of Public Provident Fund, Premature withdrawals from Public Provident Fund, Loans from Public Provident Fund, Repayment of Principal and interest of loan from Public Provident Fund, Lock-in-period for Public Provident Fund, Withdrawals on Public Provident Fund maturity, Discontinuation of Public Provident Fund account after maturity, Premature discontinuation of Public Provident Fund account.
The Public Provident Fund is a Central Government scheme and is governed by Public Provident Fund Act, 1968 .


Any resident individual can open a Public Provident Fund [PPF] account either in his/her own name or in the name of a minor. Non Resident Indians (NRIs) are not allowed to open a PPF Account. But a resident who subsequently becomes a non-resident may continue to subscribe to PPF till its maturity on a Non Repatriation basis.

Limit of subscription:

The minimum amount of investment is Rs.500 (five hundred) and the maximum amount is Rs.70,000.00 (seventy thousand) in an year. The subscription can be made in one instalment or in a maximum of 12 installments. The subscriptions should be in multiples of Rs.5 (five)

To open the PPF Account…

You just need to go to any of the branches of State Bank of India, its associated banks or Head Post offices or a GPO with the relevant documents like ID proof and Address Proof. Moreover, if you have an SBI account and it has online banking facility, you can link PPF to this account so that there can be automatic credits to this account.


Nomination facility is available in the name of one or more persons. No nomination shall be made in respect of PPF account opened in the name of a minor. The nominee can not continue PPF account of the deceased subscriber in his or her own name.


Interest is credited to the account annually, that is, by the end of March every year. Currently interest rate is 8%. Interest is calculated on the lowest balance at the credit of the account between the fifth and last day of each month.

Premature withdrawals from the Fund:

Withdrawal is allowed after the expiry of five years from the end of the year in which initial subscription is made.Only one withdrawal is allowed during an year. The amount to be withdrawn should not exceed fifty percent of the account balance at the end of the fourth year preceding the year of withdrawal or at the end of the preceding year whichever is lower less the amount of loan which remains to be repaid.

Loans from the Public Provident Fund

Loans can be taken from the Fund but only during a fixed period of time. After the end of the first year in which the initial subscription was made but before the expiry of five years , an amount equal to twenty five percent of the balance in the fund at the second year immediately preceding the year in which the loan is applied for, can be taken as loan. Second loan can be taken after repayment of the first loan.

Repayment of Principal and Interest for Public Provident Fund:

Principal is to be repaid within 36 months from the first day of the month following the month in which loan is sanctioned After the principal of the loan is fully repaid, the subscriber shall pay interest thereon in not more than two monthly installments at the rate of one percent per annum of the principal for the period of commencing from the first day of the month following the month in which the loan is drawn up to the last day of the month in which the last instalment of the loan is paid.

Lock-in-period for Public Provident Fund:

The account holder can withdraw the entire balance in the PPF account only after the expiry of 15 years from the end of the year in which the initial subscription was made.

Withdrawal on maturity:

The PPF account holder can withdraw the entire balance after fifteen years in lumpsum or in instalments not exceeding one in an year. If he chooses to receive amount in instalment it implies that he is continuing the account without deposits.

Continuation of account with deposits after maturity:

The PPF account can be extended for one or more of block of five years. The account holder should exercise this option before the expiry of the sixteenth year.

Discontinuation of the PPF Account:

Premature closure of the PPF account on account of valid and genuine reasons can be considered only after the expiry of five years from the end of the year in which initial subscription was made. The subscriber may discontinue the account at any time after joining the fund. But the repayment of the principal along with interest will be made only after the expiry of 15 years from the end of the year in which the initial subscription was made. Discontinued accounts can be revived on payment of fee of Rs.50 (fifty) along with arrear subscription of Rs.500 (five hundred) for each year.

Impact on your income tax:

PPF is out of the tax-net throughout its life cycle, namely, investment, earning and withdrawal. The amount invested in Public Provident Fund qualifies for deduction under Income Tax Section 80C, subject to a maximum limit of Rs.70,000.00(seventy thousand). Further interest earned is completely tax-free. Also, the amount received either on withdrawal or maturity is also not taxable. Thus PPF is an ideal investment avenue for those who wish to preserve their capital…

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