Public Provident Fund Scheme (PPF) is among the best long-term savings plus investment plan with assured returns on maturity. It was initially introduced in 1968 by the National Savings Institute of the Finance Ministry to promote saving habits in the form of an investment. This scheme ensures a retirement corpus while saving on annual taxes under Section 80 C of the Income Tax Act. Thus, anyone looking for a safe and secured investment option with assured returns, then Public Provident Fund (PPF) account is definitely a suitable option to consider.
How to open PPF account?
Opening a PPF account is no big deal and can be opened either at a Post Office or a nationalized bank. In fact, several private sector banks, too, provides the facility to open public provident fund account. To process the account opening application, applicants are required to submit the duly filled application along with self-attested mandatory documents. Once the process is done, the initial amount can be deposited in the account.
Features of Provident Fund Account
Effective interest rates – PPF scheme is a debt-oriented investment plan and the returns remain unaffected by the stock market performances. The government sets the PPF interest rates on quarterly basis and generally the rate of interest ranges between 8-12%, which is comparatively higher than any other investment option.
Tenure – The PPF account has a minimum tenure of 15 years and can be extended to additional 5 years as per the accountholder’s wish. Longer tenure reaps in good returns.
Investment limits – An investor has got the choice to invest either using a SIP or in lump sum. This gives more flexibility to the investor to proceed with their investment
Joint accounts – While several other investment and saving accounts have had an option of joint accounts, public provident fund scheme doesn’t offer this facility. Therefore, the account is opened, operated, and accessed in individual’s name and not allowed in joint names. However, an accountholder have a choice to designate a nominee for the investment-cum-savings account at the time of account opening.
Mode of deposit – An investor can chose to deposit funds into a PPF account through different mode of deposit options such as cash, cheque, demand draft or via online fund transfer system.
Withdrawal rules: – When it comes withdrawal terms, an investor can withdraw funds from a PPF account only upon maturity. Upon the completion of tenure, an investor is free to withdraw funds from the account credits along with the computed interest for the entire tenure of 15 years. However, in some exceptional cases, the investor can withdraw funds before 15 years and only after 6 years for some exceptional reasons such as medical emergency or child’s wedding. In addition, withdrawals can only be made once a year.