The Public Provident Fund (PPF) is a top‑choice option when planning your finances for retirement. Launched in 1986, PPF is a government‑backed savings scheme with guaranteed tax exemption on investment, maturity amount, and interest earned (also known as the EEE benefit).
Why PPF is a safe retirement and tax-saving option
- At a fixed interest rate of 7.1% this quarter, PPF is among the safest investment options for retirement and tax planning in India.
How to open a PPF account
- A PPF account is offered by any post office or public bank and some private banks in India, for a minimum deposit of ₹100–500 each month.
- It has a KYC requirement, where you will need to submit the duly filled form along with a copy of your Aadhaar card, proof of residence, and a passport‑size photo.
- You can also directly open a PPF account through your bank via online banking or mobile banking, wherever this facility is available.
- Notably, individuals can open only one PPF account each.
Public Provident Fund – key highlights
- Individuals, including minors with the help of parents, can open a PPF account. You can open one account per person for a period of 15 years.
- After this 15‑year term, the account can be extended in blocks of five years indefinitely, with or without additional contributions.
- Notably, there is no upper limit on the number of times you can extend the tenure of the account, as long as you extend it in blocks of five years. However, each extension can only be done upon reaching maturity.
What happens at the end of the 15‑year term or each block
- At the end of 15 years or at the end of each five‑year block, you have a choice to withdraw the entire amount and close the account or extend it for another five years.
- The extension is not automatic; you need to submit a formal request to the bank or post office to extend the tenure.
PPF rules of withdrawal
There are three basic types of PPF withdrawal rules: partial withdrawal, premature closure, and withdrawal after maturity. These are explained as follows:
- Partial withdrawal:
- You can partially withdraw up to 50% of the balance with no penalty after five years of the account being active.
- Premature closure:
- You can withdraw the full amount with a 1% reduction in interest rate after five years of the account being active.
- Premature closure is allowed only in specific cases, such as a change in residency status, for higher‑education fees, or for medical emergencies.
- Withdrawal after maturity:
- You can withdraw 100% of the amount upon maturity (15 years) of the account with no penalty, and it is tax‑free.
- Post‑extension withdrawals (after 15+5 years):
- You can withdraw up to 60% of the funds over five years, with one withdrawal each year, after extending the PPF tenure for five years (total 20‑year tenure).
How to reactivate an inactive PPF account
- You will need to submit a written letter or application to the bank or post office branch requesting to reactivate the account, as per the general PPF revival guidelines.
- You must also pay a minimum of ₹500 for each missed year of contributions, along with a penalty of ₹50 for each inactive year.
- After processing your request, the bank or post office will reactivate the account.
