Know about PPF account and withdrawal rules from PPF!

Public Provident Fund or PPF is one of the most popular, risk-free, long-term investments. One of the reasons for this popularity is that PPF account funds are safe, tax free and provide guaranteed returns.

What is PPF Account?

Public Provident Fund (PPF) was established in 1968 by the Ministry of Finance, Government of India under the National Savings Institute, with the aim of pooling the small investments of the common people into a long-term investment scheme. As it is a central government initiative, the investment money is fully protected and its returns are also guaranteed as it is not market-linked.

The interest earned on the money invested in the PPF account accumulates at a cyclical rate and the entire principal amount, interest earned and the accumulated amount or maturity amount are tax exempt.

PPF Account Details:

The key features of Public Provident Fund are listed below-

Benefits of PPF Account

Investment limits:

PPF account can be invested in lump sum or in maximum 12 installments annually. A minimum of ₹500 and a maximum of ₹1.5 lakh can be invested per financial year To keep the account active one has to invest in the PPF account every year.

Investment Term:

Investments in PPF accounts have a lock-in period of 15 years, before which funds cannot be fully withdrawn. The investor can extend the lock-in period up to 5 years after completion of the lock-in period if necessary.

PPF Interest Rate:

In this case the interest rate is fixed by the government for every quarter. The interest rate is fixed at 7.1% for the second quarter of financial year 2023-24 i.e. from 1st July to 30th September.

The interest amount is calculated on the minimum PPF balance of the account from 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 contribute to their PPF account before 5th of every month.

Benefits of tax exemption:

The tax policy of PPF falls under Exempt (EEE) category i.e. money invested in PPF account is exempted from the taxable income of the individual as per Section 80C of Income Tax. Also, interest earned on PPF deposits along with the deposited amount is also availed of full tax exemption.

Loan against PPF:

A PPF account holder can take a loan against his PPF balance. But in that case the rule is that the account holder will be eligible for a loan from the third financial year, and this facility will be available only till the end of the sixth financial year.

But it is never possible to borrow the full amount. A maximum of 25% of the available amount at the end of the two years immediately preceding the year in which the loan is requested can be taken.

Risks of PPF:

Public Provident Fund or PPF is regulated by the Government of India and is not associated with market linked risk. The protection of investment in this fund is fully guaranteed and it provides risk free returns. All these reasons make PPF account a highly preferred investment for customers.

PPF Nomination:

The PPF account holder can nominate one or more persons at the time of opening the account or at any time thereafter. In case of multiple persons, the PPF account holder has to mention the percentage of share of each. However, nomination is not allowed in case of accounts opened in the name of minors.

PPF Calculator

Here is a complete chart for depositing ₹1,20,000 per annum at the current interest rate of 7.10% for the financial year 2024-25:

PPF Account Eligibility

Following qualifications are mandatory for PPF account:

• Indian residents above 18 years of age can open a PPF account for themselves or in the name of a minor.
• There is no upper age limit for opening a PPF account.
• A citizen can have only one PPF account unless the second account is in the name of a minor.
• This account can also be opened for any minor child below 18 years of age. In that case, the total PPF investment in the account of minor and guardian/minor cannot exceed ₹1.5 lakh in a financial year. Also, grandparents cannot open a PPF account for their grandchildren but they can open the account if the parent of the minor has died.
• NRIs or Non-Resident Indians and HUFs or Hindu Undivided Families are not eligible to open PPF accounts. If they have an existing PPF account in their name, it will remain active till the date of maturity. But in that case the accounts cannot be extended for 5 years.
• Opening of joint account and multiple accounts is not allowed in this case.

Documents Required for PPF Account

The following documents are required to open a Public Provident Fund or PPF account:

• PPF Account Opening Form (This form is available from any bank authorized to open PPF accounts)
• KYC documents to verify the identity of the person – Aadhaar card, voter ID card, or driving license
• Address proof
• PAN card
• Passport size photograph
• Nominee Form

Aadhaar and PAN are now mandatory for PPF accounts

According to the latest notification issued by the Ministry of Finance, providing your Aadhaar number and PAN is mandatory to open a new PPF account. If you don’t have Aadhaar, you need to provide proof of enrollment application or Enrollment ID for Aadhaar at the time of account opening and Aadhaar number within 6 months from the date of account opening.

If you already have an existing PPF account and have not submitted your Aadhaar number, you should do so within 6 months from 1st April 2023. Further, if you have not submitted your PAN at the time of account opening, you should submit it within 2 months from the date of occurrence of any of the following events Eg:

• When the balance in the PPF account exceeds ₹50,000.
• If the aggregate of all credits in the account exceeds ₹1 lakh in any financial year.
• If the aggregate of all withdrawals and transfers from the account in a month exceeds ₹10,000

In case of failure to submit Aadhaar within 6 months and PAN within 2 months, the account will remain inactive until Aadhaar number and PAN are submitted to the account office.

How to open a PPF account?

PPF account can be opened easily at post office or any nationalized bank like State Bank of India or Punjab National Bank. Currently some private banks like ICICI, HDFC, Axis, Kotak Mahindra Bank are also authorized to provide this facility.

A PPF account can be opened offline as well as online. Below is an example of State Bank of India online PPF account opening process.

• Go to SBI portal and click on ‘Continue to login’ and login with your username and password.



• Click on ‘Deposits and Investments’ from the top menu bar and click on ‘Public Provident Fund (PPF)’ from the dropdown.



• Click on ‘PPF Account Opening (Without Visiting Branch)’ option.



• Read the general instructions, accept the terms and conditions and click on the ‘Proceed’ button.
• Select the account and click on the ‘Proceed’ button.



• Your account details will be pre-populated. You enter the deposit amount, nominee details below, then click on ‘Submit’ by clicking on the 2 check boxes below.



• Then pay the initial deposit amount through online mode.
• Then your PPF account will be created and PPF account number will be displayed. PPF account statement is available in internet banking.
• PPF Receipt, KYC document and your photo should be submitted to the SBI branch within 30 days of opening the account.

PPF Account Opening Process at Post Office

You can open a PPF account at a post office or bank branch by following the procedure below.

• Collect an application form from your nearest post office or bank.
• Fill the form and submit it along with the required KYC documents and a passport-size photograph.
• Then deposit the initial deposit amount in cash, demand draft (DD) or cheque.
• Once your application process is completed, you will be given a passbook for opening PPF account.

Withdrawal from PPF

The tenure of PPF is 15 years and such long term plans have certain restrictions on withdrawal before maturity.

A person can have multiple reasons when he wants to withdraw money from PPF account. In case of such emergency, partial withdrawal can be done from PPF account. But keep in mind that only partial withdrawal can be done after completion of 6 years of account opening. You can withdraw up to 50% of the total balance from the 7th financial year onwards.

You can withdraw money from PPF account only once in a financial year.

PPF Withdrawal Rules

For partial or full withdrawal from PPF account you need to submit Form C at the post office or bank branch where the PPF account is opened.

Here’s a guide on how you can withdraw money from your PPF account at a post office or bank:

• Get a Form C from the bank/post office where you opened the PPF account.
• In the form you need to enter your PPF account number and the amount you want to withdraw from the account. Apart from that, you also need to mention the number of years the account has been active. If you want to withdraw from a minor’s PPF account, mention his name in the form.



• At the bottom of the form you need to mention whether the money will be deposited directly into the savings account or issued by a check or demand draft from the bank.

Nomination of PPF Account

One or more persons can be nominated in the PPF account. If, more than one person is nominated, the percentage share of each nominee should be mentioned. However, in the case of nomination, it should be noted that-

• Nomination can be made at any time during the tenure of PPF. Subsequently, if the nomination needs to be changed or cancelled, it should be done through an application.
• Account holder has to submit Form E for nomination.



• The nomination form must be signed by the account holder and two witnesses. Nominee’s signature is not required.
• Nomination cannot be made in respect of PPF account of a minor.

List of PPF Account Participating Banks

You can open PPF account at your nearest post office branch or bank branch. Below is the list of PPF Participating Banks:

• Andhra Bank
• Allahabad Bank
• Bank of Baroda
• Bank of India
• Bank of Maharashtra
• Canara Bank
• Central Bank of India
• ICICI Bank Limited
• IDBI Bank Limited
• Corporation Bank
• Dena Bank
• Indian Bank
• Indian Overseas Bank
• Oriental Bank of Commerce
• Punjab National Bank
• State Bank of Bikaner and Jaipur
• State Bank of Hyderabad
• State Bank of India
• State Bank of Mysore
• State Bank of Patiala
• State Bank of Travancore
• Syndicate Bank
• UCO Bank
• Union Bank of India
• United Bank of India
• Vijaya Bank

How to transfer PPF account to another branch or bank?

There are times when you have to change city due to work or any other reason, then your PPF account can also be transferred to other bank branches or post offices. You can transfer a PPF account across the country.

The procedures for PPF account transfer are detailed below:

• Go to the bank branch or post office where you have PPF account and don’t forget to take PPF passbook along with it.
• A transfer application form has to be filled and submitted there. The transfer application form shall include the full address of the new bank branch or post office.
• After submitting the application form the current branch representative will start your application process and forward all the documents including certified copy of the account to the new bank or post office branch.
• If the new bank or post-office branch accepts your documents, you will be notified. In case of any change you need to submit a new PPF account opening application form at the new branch and submit PAN card copy, personal identity proof and address proof to complete your KYC process.

How to activate an inactive PPF account?

If the minimum contribution of Rs 500 per year is not deposited in the PPF account, the account will be deactivated. Following are the ways you can recover an inactive PPF account.

• To reactivate the account a written request must be submitted to the post office or bank branch where the account is held.
• A minimum penalty of Rs 500 for each year of non-contribution and Rs 50 for each inactive year is payable.
• The post office or bank will then process your request and the account will be reactivated.

Extension of PPF Account

A Public Provident Fund or PPF account has a tenure of 15 years, after which you can close the account or extend it for up to five years with or without re-depositing any contributions. The number of these extensions is unlimited. Therefore, you can make your PPF account tenure 20 years, 25 years, 30 years, and more.

PPF account premature closure

PPF account cannot be prematurely closed within 5 years of account opening. Then the account can be prematurely closed only for certain reasons like serious illness of the account holder, or his spouse or dependent parent or change of residence or higher education of the child.

Comparison of PPF and FD

Public Provident Fund (PPF) and Fixed Deposits (FDs) are equally popular and both offer risk-free guaranteed returns. However, there are significant differences between the two such as:

Investment Limit: There is no maximum investment limit in case of FD. However, it may vary from bank to bank i.e. the bank may set its own limits like SBI’s maximum FD investment limit is Rs 2 crore. Depositors who make fixed deposits above Rs 1 crore are offered special interest rates by the bank.

Tenure: There is a significant difference in the tenure of these two sectors, namely that investors in FDs get to choose the tenure period. In that case you can set the tenure from 7 days to 10 years. On the other hand, PPF has a fixed tenure of 15 years, which provides a stable and long-term savings.

Interest Rate: FD interest rate is determined by the bank so it may vary from one bank to another. However, FDs with higher interest rates are preferred in case of senior citizens. There is no such provision in case of PPF. In this case, the interest rate is fixed by the government every 3 months.

Loans: There are special differences between the two areas in terms of loan facilities. In case of PPF account loan you can borrow up to 25% of the total balance between 3rd and 5th year of account opening. On the other hand, FDs also provide loans, and in that case you will get a loan facility of up to 90% of the total deposit amount. FD loan interest rate is 1-2 percent higher than normal FD interest rate.

Tax Exemption: In case of PPF, annual deposit amount, interest amount and maturity amount are fully exempted under Section 80C of Income Tax. But in case of FD, maximum annual deposit of Rs 1.5 lakh is tax exempt and no tax exemption is available on interest income received from FD. In that case it will be taxable as per the tax slab of the depositor.

Partial Withdrawal: Partial withdrawal can be made from the 7th financial year after opening the PPF account. In that case you can withdraw up to 50% and there is no tax on partial/premature withdrawal.

On the other hand in case of premature withdrawal of FD, the investor has to pay a minimum penalty of 0.50% to 2% depending on the bank policy.

PPF and Mutual Fund Comparison

Public Provident Fund (PPF) is a savings scheme provided by the government, which provides guaranteed returns. A mutual fund, on the other hand, is an investment system that collects money from many investors and invests the money in securities such as stocks, bonds and short-term debt.

The following features are notable in both systems:

Interest Rate: The interest rate of PPF is fixed quarterly by the government. Generally this rate fluctuates around 7-8%.
On the other hand, mutual fund returns are market-linked. It depends on the market conditions as well as the performance of the fund manager. Some of the biggest funds in India have interest rates of 10-15%.

Security: PPF is a government regulated savings account. The money deposited in it is used by the government and its interest is also paid by the government. So there is virtually no chance of default.
Mutual funds are subject to market risk. Equity fund prices fluctuate almost daily due to fluctuations in the fund’s stock prices. However, in the long run, mutual funds promise high return potential.

Tax Exemption: A maximum of Rs 1.5 lakh per annum can be deposited in PPF account and tax exemption up to Rs 1.5 lakh per annum under Income Tax Act 80C i.e. fully exempt. Besides, there is no tax on PPF interest.
On the other hand, tax-saving mutual funds are funds whose investments are eligible for tax exemption under Section 80C of the Income Tax Act, 1961. These funds are called Equity Linked Savings Scheme (ELSS). In this case the annual deduction limit is Rs.1.5 lakh However, tax-saving mutual funds have a lock-in period of 3 years. Tax-saving is not applicable in case of other mutual funds.

Comparison of PPF and LIC

Public Provident Funds and Life Insurance Corporations are however quite different in purpose. PPF Hol is an investment for a secure future whereas LIC Hol is an insurance which is done to protect the risk.

Naturally there are significant differences between the two systems, they are:

Purpose: The main purpose of PPF is savings and investment. In this case, the investor invests some money in it according to his benefit to increase his savings. LIC Hol, on the other hand, is an insurance and risk protection system that is saved for a safe future in case of accidents or unforeseen events.

Regulatory Authority: The PPF hole is directly regulated by the Central Government, while the LIC hole is regulated by the ‘Insurance Regulatory and Development Authority’ of the Department of Financial Services under the Ministry of Finance, Government of India.

Interest Rate: Since PPF is a savings scheme, interest is relatively high. Current interest rate of PPF is 7.10%. LIC’s interest rate depends on the policy but is generally between 5%-6%.

Tenure: PPF tenure is 15 years and is fixed which you cannot change. But for special needs you can withdraw maximum 50% of the deposited amount after 6 years of opening the account. On the other hand in LIC the tenure is very flexible, in this case the customer gets a chance to choose it according to his convenience.

Deposit Amount: Minimum annual deposit amount for PPF is ₹500 and maximum is ₹1,50,000. LIC’s premiums are fixed which the customer cannot change at will.

Premature closure: There is no rule to close the account within 5 years in case of PPF. However, it can be terminated prematurely from the following year only for some special reasons such as physical illness or higher education expenses. But in case of LIC it can be discontinued after 3 years but in that case penalty will be deducted.

Tax Exemption: PPF falls under the category of ‘Exempt Exempt Exempt’. Hence investment, interest and matured money are completely tax free. The matured amount in LIC will be fully tax-free under Section 10(10D) if the premium amount is less than 10% (20% in case of policies issued after 1st April, 2003) of the matured amount.

Questions related to PPF(FAQs):