PPF Account Opening Process, Documents, Eligibility & Benefits

Updated: 19-12-2023 05:59:47 AM

Public Provident Fund (PPF) is one of the most popular long term investment options in India which provides government-guaranteed returns along with added tax benefits up to Rs. 1.5 lakh under section 80C of the Income Tax Act, 1961. You can deposit any amount ranging from Rs. 500 to Rs. 1.5 lakh in a financial year in the PPF account. However, to invest in the public provident fund, you must have a PPF account. In this article, the process related to the opening of a PPF account will be explained.

How to open a PPF account?

A PPF account can be opened at a post office, at a bank branch of any nationalized bank or major private sector bank. You can also submit an online request to open a PPF account. Once the account is opened, a passbook similar to your bank account passbook will be issued to record all transactions related to your PPF account. There are some banks which provide online facility to view the transaction record of your PPF account.

Documents Required to Open a PPF Account

• PPF Account Opening Form (Form A) which is available at the bank branch and also can be downloaded online.
• ID Proof (any of the following)
  1. PAN Card
  2. Driving License
  3. Voter ID Card
  4. Passport
  5. Aadhaar Card

• Address Proof (any of the following)
  1. Electricity Bill
  2. Telephone Bill
  3. Aadhaar Card
  4. Ration Card

• Two Passport Size Photographs
• Birth Certificate (In case of a minor)/PAN Card for minor

Note: All the required documents need to be self-attested by the individual and originals need to be taken to the bank branch while opening the account.

Eligibility Criteria for PPF

• Only a resident individual can open a PPF account
• NRIs who opened a PPF account when they were resident of India in the past can continue to operate the account for 15 years (i.e. till account maturity). However, there is no option available to NRIs to extend the term of the PPF account beyond 15 years
• Minors can open a PPF account provided they have a valid proof of age
• A person can only open one PPF account in his/her name

Benefits of Opening a PPF Account

• Risk-Free Returns: The returns on PPF are government-guaranteed which makes it a safe and secure investment option
• Attractive Returns: Along with safety, PPF also provides attractive returns to the investor as compared to other investment options available in the low-risk category. The interest rate on PPF is notified by the central government every quarter. Presently, PPF deposits earn 7.1% (Q3, 2020-21) interest compounded annually
• Tax Benefits: Under section 80C, an investor can claim a tax deduction on PPF deposits up to Rs. 1.5 lakh annually
• Long-Term Investment: A 15 years lock-in period makes PPF suitable for an investor looking for a long-term saving scheme. Further, one can extend his/her PPF account indefinitely in blocks of 5 years after maturity
• Loan Against PPF Deposits: You can request for a loan against your PPF deposits from the completion of the 3rd year of your PPF account till the end of 6th year. However, you can claim only up to 25% of PPF deposits recorded at the end of the previous year

Premature Closure of PPF Account

Premature closure of PPF account is allowed only after completion of 5 years on specific grounds. You can make an application for premature closure of the PPF account for the medical treatment of a family member or for the higher education of only the PPF account holder. However, premature closure of PPF account will attract an interest rate penalty of 1%.

Tax Implication on PPF Account

Investments made to the Public Provident Fund comes under the EEE (Exempt-Exempt-Exempt) category. Therefore, both principal, interest accrued as well as maturity amount is tax-exempt. You can invest up to Rs. 1.5 lakh in PPF and claim tax deduction under section 80C of the I-T Act, 1961.

List of All Forms Required for PPF Account

List of Forms	Usage
Form A	To open a PPF Account
Form B	For making deposits to PPF account
Form C	To make partial withdrawals from PPF account
Form D	To apply for a loan against PPF account
Form E	To add a nominee for the PPF account
Form F	For Changing Nomination
Form G	To claim PPF funds by the nominee
Form H	To extend the maturity period of PPF account

Know more about PPF Forms

Transfer of PPF Account

A PPF account can be transferred to a different bank, or a different bank branch or to a post office.

Also Read: How to Check Balance in Your PPF Account

Reactivation of PPF Account

PPF account becomes inactive if the minimum contribution of Rs. 500 is not made in any financial year. You can reactivate the account by submitting a written request at the bank branch or post office where your PPF account is based. However, you need to pay a fine of Rs. 50 for every year in which the minimum PPF account contribution has not been made. Further, the account holder is required to make a minimum investment of Rs. 500 for every such year in which PPF account was inactive.

For example, if your PPF account has been inactive for the last 3 years, then you are required to pay Rs. 150 ( 50 * 3) as a fine. Further, you must deposit Rs. 1500 ( 500 * 3) towards your PPF account to reactivate it.

PPF Calculator

Online PPF calculator basically assists you in making PPF calculations such as loan against PPF eligibility and PPF account maturity value. You can also calculate the interest earned on PPF deposits and also the monthly breakup of interest accrued. You are just required to enter details such as tenure, deposit frequency and deposit amount to make the PPF calculation instantly.