Finance: Public Provident Fund (PPF)

The Finance System - PPF

The Public Provident Fund (PPF) started in India in 1968. It is a safe and good long-term investment choice. Anyone, including children, can open a PPF Account if they live in India. It was created to help people save and invest small amounts of money. PPF helps you grow your wealth in a safe way. It is great for those who want a secure investment that gives returns and helps with tax savings. PPF is a government-supported savings plan in India that offers tax-free interest and returns. It is a popular choice for people saving for retirement and wanting tax benefits.

Importance of a PPF Account

Many people use PPF to save for retirement by regularly setting aside money for a long time. Because it offers good interest rates and tax benefits, PPF is popular among small savers.

A PPF Account is a good choice for people who want low-risk investments. It's essential to know what a PPF Account is and how to invest in it. Putting money in a PPF Account helps spread your investments and gives you tax benefits. To get the most interest, you should invest by the 5th of each month, as interest is based on the lowest balance from the 5th to the end of the month.

The PPF scheme is perfect for those who want low-risk options. Since it is run by the government, it guarantees returns to help meet financial needs in India.

Benefits:

Tax-free Earnings & Savings: With a PPF account, you can earn money without paying taxes on deposits, interest, and the total amount when it matures. You can save up to ₹46,800 a year in taxes, which helps your wealth grow in a tax-friendly way. The money you put into the account can also be deducted from your taxable income under section 80C.

Assured returns: The PPF Account gives a guaranteed interest rate of 7.1% per year (as of Q2 of FY 2024-25).

Low investment requirement: You can start with just ₹500 and invest up to ₹1.5 lakh each year.

Long-term Investment - You need to keep your money in the account for at least 15 years, making it a good choice for long-term savings. You can also extend this period in 5-year blocks for more flexibility.

Flexibility - You can open an account for yourself or for a child with a guardian at any bank branch, making it easy to access.

Features:

Single Account - You can only open one PPF account in your name. If you open more than one, the extra account won't earn interest.

Online management - You can manage your PPF account online anytime using internet banking or a mobile app.

Power of compounding- You can earn interest on the interest in your PPF account for 15 years, with the option to extend it every 5 years.

Flexible investment options - You can decide how often to invest – yearly, half-yearly, quarterly, or monthly.

Interest Rates- The interest rates change based on government updates and are checked every three months to ensure you get the latest rates.

Subscription Limits- You need to invest at least Rs. 500 and can invest up to Rs. 150,000 in a year, making it available for people with different incomes.

Loan and Withdrawal Options- After 5 years, you can take out some money, and you can close the account in certain cases, like medical emergencies or funding your child's education. You can also borrow up to 25% of your balance after one year.

Transfer facility- You can move your PPF account from banks or post offices to any Bank.

Authorized Branches- You can access the scheme at any branch of the bank, making it easy to use.

PPF Account opening process -

You can Open PPF account in offline as well online mode.

Offline Process-
You have to visit any bank or post office branch to open PPF account. Account can be open by filling form provided by branch & submitting relevant document copy with it. You have to produce original documents for verification.

Following documents required for opening PPF account-

PAN card (linked with Aadhar)
Aadhar Card
Passport-size photo
Form A
Proof of residence, such as a utility bill or passport.

Online Process -
Here is the process of opening a online PPF Account:

Log in to your Bank Account through Internet Banking or Mobile app.
Go to the ‘Bank Accounts’ section and select ‘PPF Accounts.’
An Aadhar Card is needed for e-Signing the digital PPF Account Opening form.
Enter the required details, set up standing instructions for regular contributions and E-sign the application.
Once completed, your PPF Account will be created and funds will be debited from your Bank Savings Account.

Who can Open PPF Account-

To open a PPF Account, it is important to know the rules you must meet. Here are the rules to open a PPF Account:
You must be an Indian citizen
HUFs and NRIs are not eligible to open a PPF Account
Annual contributions can range from a minimum of ₹ 500 to a maximum of ₹ 1.5 lakh.
At the time of the PPF Account opening, a nominee must be registered.
Minor can also open PPF account. A natural or legal guardian can open the Account on the minor's behalf
Until the minor reaches the age of 18 years, the guardian is in charge of the Account