Public Provident Fund (PPF) is a scheme of the Central Government of India for the investment which not only generates guaranteed returns but also gives tax rebate under section 80C of Income Tax Act. PPF account can be opened for a minimum period of 15 years and can be extended indefinitely in block of 5 years.
PPF is very popular investment instrument among all the money-saving avenues available for investment due to its flexible nature. The balance lying in PPF account is not subject to attachment under any order or decree of court.
When was PPF Launched?
- Individuals, who are residents of India, are eligible to open Public Provident Fund Account.
- A person of any age can open a PPF account.
- A person cannot open more than one account in his/ her own name.
- Joint ownership of PPF Account is not permissible.
- Minors can also open their PPF Account. However, there must be a guardian for PPF accounts opened in the name of minors. Parents can become guardian of their minor children. A guardian has to be only the father or the mother (not both) or a court-appointed guardian. A grand-parent cannot open PPF account on behalf of his/ her grand-child apart from those cases in which both the parents have died.
- Non-resident Individuals (NRI), Hindu Undivided Families (HUF) or Body of Individuals (BOI) cannot open PPF Account.
Interest Calculation in PPF Account
PPF interest is calculated at the prevailing rate on monthly basis on the lowest balance between the end of the 5th day and last day of month but the total interest for the whole financial year is credited to PPF account only once i.e. at the end of financial year.
Interest earned on the PPF account is fully exempt from tax under Section 10 (11) of the Income Tax Act.
Tax Advantages under PPF
Interests are tax-free and contributions are eligible for tax exemption under Section 80C of the Income Tax Act. Withdrawals are also fully exempt from tax.