PPF (Public Provident Fund) – Eligibility, Tax Benefits, Interest Rate 2024

• Lock-in period: PPF is a long-term investment with a lock-in period of 15 years. This means that the amount accumulated in a PPF account can be withdrawn only at maturity, which is 15 years from opening the account. This tenure can be extended by 5 years at the end of the actual lock-in period. Premature withdrawals are allowed but only in case of emergencies.
• PPF interest rate: The interest rate for PPF is set and paid by the government for every quarter. PPF interest rate for the third quarter of the FY 2024-25 i.e. from 1st July to 30th September 2024 has been fixed at 7.1%. Each month, the interest amount is calculated on the lowest PPF balance in the account after the 5th of every month to the last day of the month and the amount is credited to the PPF account at the end of every financial year. Hence, PPF investors are advised to make contributions to their PPF account before the 5th of each month.
• Minimum and maximum investment: Individuals need to make a minimum investment of Rs. 500 annually. A maximum investment of Rs. 1.5 lakh can be made in one financial year in a PPF account.
• Taxation: PPF also offers the best tax benefits as it falls under the Exempt-Exempt-Exempt (EEE) category of the tax policy. This means that first, the money invested in PPF in a financial year gets exempted from an individual’s taxable income (Under Section 80C) for that year. Also, the interest earned on PPF deposits along with the accumulated amount doesn’t have any tax liability. 
• Loan against PPF: A PPF account holder can take a loan against his PPF balance.  However, the loan can be taken only after the completion of one year but before the expiry of five years (from the end of the FY in which the initial subscription was made). The maximum loan amount is limited to 25% of the PPF balance at the end of – the 2^nd year or the year preceding the year in which the loan is being applied.

Also Check: PPF Calculator to calculate returns on your investment

• Only an Indian resident can only open a PPF account
• NRIs are not eligible to open PPF accounts. However, a resident Indian who has become an NRI after opening an account can continue the account until maturity
• Parents/guardians can also open PPF accounts for their minor children
• Opening of joint accounts and multiple accounts are not allowed

Know More: PPF Account for Minors: Eligibility, Documents Required & Taxation

Here is a list of documents that should be procured at the time of opening a PPF account:

1. PPF account opening form (This form can also be obtained from any bank which is authorized to open a PPF account)
2. KYC documents to verify the identity of the individual- Aadhaar Card, Voter ID card, or Driving License
3. Proof of Address
4. PAN Card
5. Passport-size photograph of the individual
6. Nomination form- Form E (This form can be obtained from any bank which is authorized to open a PPF account)

To download the forms required to open a PPF account, Click Here

Individuals can open a PPF account at post offices or through nationalized banks and major private banks like ICICI, Axis, HDFC, etc.

Banks eligible to open PPF Account for their Customers

Please Note: The Banks are only intermediaries that help you open the PPF account, the money you deposit still goes to the Government, and not to the particular Bank.

How to Open a PPF Account Online?

If you have an account with any of the above banks, you can use their net banking service to open a PPF account:

1. Log in to your net banking portal
2. Click in the option that allows you to ‘Open a PPF Account’
3. Choose the relevant option between a ‘self account’ and a ‘minor account’
4. Enter the required information such as nominee details, bank details, etc.
5. Verify details like your Permanent Account Number (PAN), etc. that is shown on the screen
6. After verifying the details, enter the amount that you wish to deposit in your PPF account
7. You will be asked to set up standing instructions that enable the bank to deduct the amount at fixed intervals or in a lump sum
8. After you make your choice, you will receive an OTP on your registered mobile number
9. Once this verification is done, your PPF account gets opened. You are advised to save the account number that is displayed on the screen for future reference
10. Certain banks may even ask you to submit the hard copy of the details entered along with the reference number and submit it to the respective bank with your KYC details

It must be noted that each bank may have a relatively different process for opening a PPF account. The general steps to be followed, however, remain the same.

Checking PPF Balance Online

If the PPF account has been opened through the net banking service of a bank, the PPF balance can be easily checked online:

1. Before you begin, ensure that your net banking with your bank account is active
2. Log in to your PPF account using your internet banking credentials
3. Once you log in, your current PPF account balance will be displayed on the screen
4. Logging in to your account using internet banking allows you to transfer funds to your account online, set up standing instructions for your PPF account, download your account statement, and submit your PPF loan application, etc.

Checking PPF Balance Offline

The bank provides a separate passbook for PPF account which comprises your account balance, account number, bank branch details, credits/debits to your account, etc. You can check your PPF account balance offline by updating this passbook.

• The PPF passbook can be updated periodically by visiting a branch of a bank from where you opened the PPF account
• Some banks have furnished automated passbook update machines at the banks. However, you need to visit the bank during operating hours to get your passbook updated
• Once updated, your PPF passbook will show all the credit/debit transactions along with the outstanding balance

In case you have a PPF account opened through the Post Office, you would need to visit the same post office to update your passbook.

PPF works under a mandatory lock-in period of 15 years. However, partial withdrawals can be made in emergency cases. Partial withdrawals from the account can be made after the completion of the 5th Financial year from the year in which the account is opened. For example, if the account was opened in Feb 2015, withdrawal can be made from the financial year 2020-21 onwards. Only one partial withdrawal is allowed per financial year. The maximum amount that can be withdrawn per financial year is the lower of the following:

1. 50% of the account balance as at the end of the financial year, preceding the year of withdrawal, or
2. 50% of the account balance as at the end of the 4th financial year, preceding the year of withdrawal

Application Form for Withdrawal from PPF Account should be submitted to withdraw a partial amount from the PPF account.

• Details such as account number, amount of money to be withdrawn, etc. are to be mentioned in the form
• A declaration stating that no other amounts were withdrawn during the same financial year should also be submitted
• In case, the PPF account is in the name of the minor, an additional declaration stating that the amount is required for the use of a minor child who is still a minor and is alive
• Passbook is also required to be submitted along with the form

Related Article: PPF Withdrawal rules: How to withdraw your partial & complete PPF

The facility to avail loan against the PPF account is available after expiry of one year but before expiry of five years (from the end of the FY in which the initial subscription was made). Only one loan can be availed in a financial year and a second loan can be obtained only after the closure of the first loan.

For example, if the PF account is opened on Jan 1, 2012 (FY 2011-12), the end of the financial year in which the account was opened is Mar 31, 2012. The loan can be taken from 1st April 2013 (FY 2013 – 14) onwards. Five years from the end of the financial year in which account was opened on March 31, 2018 (FY 2017 – 18). Thus, the loan can be obtained from Mar 31, 2013, to Mar 31, 2018. 

• Form D must be submitted to avail loan against the PPF account
• The form requires details such as account number, the amount being borrowed, etc along with the undertaking that the amount will be repaid with interest within three years
• The maximum amount of loan that can be availed against PPF accounts is 25% of the balance at the end of the 2nd financial year preceding the year in which the loan was applied for
• In the above example, if the investor wants to take the loan in April 2013, the maximum loan that can be availed is 25% of the balance as on Mar 31, 2012

Interest on Loan against PPF

• If the loan is repaid within 36 months, interest rate of 1% p.a. over and above the existing PPF interest rate shall be applicable. In case, the loan is repaid after 36 months, interest rate of 6% p.a. over and above the existing PPF interest rate shall be applicable from the date of loan disbursal.
• The interest is not paid with the principal amount in EMIs. Once the principal amount is fully repaid the interest has to be repaid within 2 months.

Must Read: Other Investment Alternatives to PPF

Nomination can be made in favour of one or more person(s). In case, more than one person is appointed as a nominee, the percentage share of each nominee should be specified.

• Nominations cannot be made for the minor’s PPF account
• Parent, spouse, relatives, children, friends, etc. of the account holder can be nominated
• The account holder must submit Form E to add a nominee to the PPF account
• Nomination can be made at any time during the tenure of account. Change, cancellation or alteration in nomination can be done through Application for Change of Nomination
• Nomination forms need to be signed by the account holder and two witnesses. Signature of the nominees is not required

After being duly filled, the form must be submitted at the appropriate bank/post office branch.

The PPF account can be transferred from the bank to the post office or vice versa. It can also be transferred between different branches of the same bank.

The PPF Account becomes inactive if the minimum contribution of Rs 500 per year is not made. To revive an inactive PPF account,

• A written request to reactivate the account should be submitted at the post office or the bank branch where the account is based
• A fine of INR 50 for each year the account has been inactive has to be paid
• Arrears of a minimum amount of INR 500 for all the years the account has been inactive have to be paid

Premature closure of PPF accounts is not permitted within 5 years of opening the account. Thereafter it can only be closed on specific grounds such as life-threatening ailments affecting the account holder, spouse, dependent children or parents. Supporting medical documents have to be produced to support a claim on these grounds.

A PPF account matures after 15 years from the end of the financial year in which the account was opened. At the time of maturity, the account holder has the option to extend the tenure in the blocks of 5 years:

Extension of PPF with Contribution

A subscriber can extend the life of the PPF account indefinitely in blocks of 5 years at a time. The subscriber has to submit a request to extend the account, with further contributions by submitting Form H.

• The choice of extension with contribution has to be made within one year from the date of maturity, otherwise, the default choice of extension without further contribution applies
• Once the account is extended with contributions, the maximum 60% of the balance as on the date of extension of the account can be withdrawn
• This amount can be withdrawn in one go or can be spread over several years
• A maximum of one withdrawal can be made in a year

Extension of PPF without Further Contribution

If no choice is made, then the default choice, .i.e. extension without further contribution applies.

• You do not need to fill any form to choose this option
• A maximum of one withdrawal is allowed per year and any amount up to the total balance in the account can be withdrawn

Once the PPF account is renewed with/without contribution, the option cannot be switched, i.e. from with contribution to without contribution or vice versa.

In case the amount is deposited in the account without choosing the correct option, no interest will be payable on such amount. Also, no deduction under the Income Tax Act will be available on such contributions.

Q. What is PPF used for?

PPF is used primarily to earn relatively higher rate of interest and save tax at the same time. People having low risk appetite invest in PPF and can claim tax deductions up to Rs. 1.5 Lakh under Section 80C while filing the Income Tax Return.

Q. Will I continue to earn interest on my inactive PPF account?

No, interest is not calculated for the year(s) the account remains inactive. Once the account is revived, interest will be calculated on the total balance available at the time of revival.

Q. If I have a PPF account in my name and another one in my minor daughter’s name, can I claim tax deductions on both PPF accounts?

Rs. 1.50 lakh is the maximum total investment that you can make to your account, your spouse’s and/ or your minor child’s account cumulatively in a financial year. Also, only amounts up to Rs. 1.50 lakh can be claimed as deductions under Section 80C of the Income Tax Act.

Q. Can I open a PPF account on the behalf of my grandchild?

No, only parents/ legal guardians can open and operate a PPF account a PPF account on behalf of their minor child/ward. 

Q. Is it possible to extend my PPF account for 3 years on maturity?

No. Extensions can only be made in blocks of 5 years.

Q. Can I transfer my PPF account to another branch or office?

Yes, you can transfer your PPF account to another branch or office.

Q. How can I know the interest that I would be earning on my SBI PPF account?

You can use the PPF calculator available on the Paisabazaar website to check the year-wise PPF returns that you can earn by contributing to your PPF account over a pre-determined period and with a specific deposit frequency. You can also use a bank specific calculator such as the SBI PPF Calculator to check your PPF returns.

Q. How to claim PPF in case of death of PPF account holder?

The nominees can claim the PPF account using Form G. Subscribers must attach the death certificate, succession certificate, PPF Passbook, Letter of Indemnity, and Affidavit along with the form. A succession certificate is not required if the account balance is less than Rs. 1 lakh. A legal heir can also claim the account without the presence of any nominee by producing all the documents mentioned above.