Opening A PPF Account In Post Office
What is a post office PPF account?
PPF or a Public Provident Fund is a long-term investment and savings opportunity. It is a safe investment that gives high returns. Since it is opened at a post office, it comes under the purview of the Government of India. This makes it extra secure.
Who can open a PPF account?
Any resident individual employed in the private sector is eligible. Apart from this, anyone who is self-employed, or is a pensioner can also open an account. Non-residents cannot open a PPF account at a post office. However, if they opened the account when they were a resident, they may continue operating it till maturity.
The guardian of a minor may open a PPF account for them. In case the guardian passes away, the minor cannot continue with the account. The accumulated amount is refunded and the PPF account is closed.
Further, an individual can open only one PPF account across the nation. Opening a joint public provident fund account is not allowed.
What are the main features of a Post Office PPF account?
A minimum amount of Rs. 500 must be deposited in the PPF account in a year. The maximum limit for the same is Rs. 1,50,000. It is mandatory to deposit some amount every year in your PPF account. You can deposit the amount in a lump sum. However, if you plan on depositing in installments, you can do so 12 times a year.
The Government of India fixes the post office PPF interest rate. The rate is determined for every quarter and is compounded annually. The current interest rate on a public provident fund account is 7.1% per annum.
The maturity period of a post office PPF account is 15 years. If you wish to extend this period, you can submit an application one year before maturity. This allows you 5-year extensions for the PPF account.
Amount withdrawal and premature closing
If you want to withdraw funds from your PPF Account, you can do so after completing 6 financial years. The amount that can be withdrawn is limited to 50% of the fourth preceding year-end from the date of withdrawal.
As for premature closing, you are only entitled to do so if:
- You are the account holder, or child or spouse of the account holder, with a critical illness.
- Your residential status has changed after opening the account.
- You need funds for your higher education or that of your dependent children.
While filing your tax returns, you can claim a deduction for the amount deposited under section 80C. The upper limit for the claim is Rs. 1.5 lakh. Moreover, interest received on a PPF account is free from tax. So is the amount received on maturity.
Loan against PPF
An account holder may secure a loan against the PPF account after 3 years of opening the account. This facility to avail of a loan is only available till the 6th year from the opening of the account. You can only be granted 25% of the deposited amount at the end of the second year immediately preceding the year in which you apply for the loan.
Interest is charged at 1% of the loan amount if it is paid within 36 months. If repayment takes longer than that, the interest is charged at 6%.
You can only take one loan in one financial year. Furthermore, a second loan is not granted until the first loan is paid in full.
How to open a Post Office PPF account?
You must furnish the following original documents:
- An identity proof: This can be your Aadhar Card, Passport, Voter ID, etc.
- An address proof: This includes the above-stated documents as well. You can also show your ration card for the same.
- Your Permanent Account Number (PAN) Card.
- 2 passport size photographs
The entire procedure of opening a PPF account at a post office is quick and hassle-free. Follow the steps mentioned below to get an overview of the process:
- Fill out an account opening application. You can get this form either from your nearest post office or you may download it online.
- Take the duly filled form along with your original KYC documents and passport-size photographs to the post office. The documents are subject to verification. Once this is done, you will have to deposit a minimum of Rs. 100 initially. The upper limit for the initial deposit is Rs. 70,000. However, the minimum and maximum annual deposit amounts remain Rs. 500 and Rs. 1,50,000 respectively.
- Once all these formalities are completed, you will be handed a passbook. This passbook will contain all the required information about your PPF account. This includes your PPF account number, branch details, account holders’ name, etc.
Why should you open a Post Office PPF account?
The Public Provident Fund is an excellent savings and investment scheme. It allows you to earn high returns while keeping the deposits safe. It is a government-backed investment opportunity that provides huge benefits in the long term. You can operate the account even with a small amount. It is a valuable addition to your portfolio that also helps you realise tax benefits.