All you Need to Know about Public Provident Funds (PPF) : Features and Benefits

According to a study by HSBC, as many as 68% Indians expect financial support from their dependents in retirement, but only 30% of them are receiving such support. After all your years of working hard, you deserve to live a safe and happy retirement life. So, your best bet would be to have a sound retirement plan in place to remain independent. To help you achieve this, the government has various retirement schemes, one of which is the Public Provident Fund (PPF).

By investing in a PPF for a long period, you can build a robust nest egg for your retirement. PPF is safe and yields excellent returns. What’s more, its EEE tax status makes it even more desirable and beneficial. So, make the most of a PPF by familiarising yourself with it.

Eligibility

A PPF is offered by the post offices and banks to you. You can open a PPF if you are one of the following.

• You are a resident Indian
• You are an individual
• You are 18 years old or older
• You are a parent or guardian of a minor

Interest Rate

The PPF interest rate changes on a quarterly basis. It is linked to the 10-year government bond yields. The PPF interest rate for the last quarter of 2018 was 8% and remains unchanged for the quarter ending 31 March 2019. It is important to note that the PPF interest is calculated on a monthly basis on the minimum balance at the end of the 5th day of the month and the last day of the month. Therefore, it would be wise to deposit in your PF account before 5th day of any month. Note that the interest is only credited into your PF account balance on 31 March of a financial year you can check the online PF balance.

Contribution

Since PPF is a voluntary scheme you can deposit any amount between Rs.500 and Rs.1.5 lakh per financial year. You can invest as a lump sum or in parts. All your deposits under Rs.1.5 lakh per year are eligible for tax deduction under Section 80C. Any deposit that you make beyond the prescribed amount is not eligible.

Maturity and Withdrawals

A PPF account has a lock-in period of 15 years only after which your PPF account matures and you can make withdrawals. Should you wish to continue with the PPF benefits, you can extend your investment by 5 years as many times as you wish to. However, in case of immediate financial needs, you can apply for a loan against your PPF account from the third to the sixth financial year. The government also allows you to make premature withdrawals after the completion of 7 years of starting the PPF.

Depending on the quantum of your deposits, you will receive lump sum on maturity of your PPF. You can grow this PPF maturity proceeds by invest the PPF corpus in fixed deposits, mutual fund and stock market etc. 

Premature closure

You can only close your PPF account before maturity under certain conditions as laid down by the government. Additionally, you should have completed at least five years from opening the account to do so.

With this resourceful guide about PPF and its basics, you are ready to start planning for a financially-secure retirement. Remember, the earlier you invest in PPF, the greater are the benefits that you can enjoy.