All About Public Provident Fund Account

We’ve all heard about PPF Accounts and watched our parents invest in them, but what is the PPF Interest Rate in India and what are the advantages of investing in this type of instrument? This is a standard topic, and in this post, we’ve attempted to clarify the basics and the advantages of investing in this type of tax-saving instrument.

What is PPF?

PPF stands for Public Provident Fund Account and is a Government of India Long-Term Debt Scheme that pays regular interest. Anyone in India (whether salaried, self-employed or otherwise) can participate in this scheme and earn a generous tax-free return, typically larger than banks’ interest on fixed deposits.

Any Post Office and select authorised Bank branches can start a Public Provident Fund. Many people choose to hold a PPF account in a bank rather than a post office because banks allow online deposits into your Public Provident Fund, whilst post offices do not.

NRIs (non-resident Indians) are not permitted to invest in the Public Provident Fund. If a person opens a Public Provident Fund as a resident of India but later becomes an NRI, he would be able to continue investing in his account.

A PPF account can be formed on behalf of a minor by either the father or the mother, but neither can open this sort of account. Grandparents are not permitted to open a public provident fund account for a kid. If both parents die, the minor’s grandparents can act as guardians and open an account on their behalf.

It’s vital to remember that a PPF account is not the same as a PF account. PPF Accounts are only for salaried employees, however, both salaried and self-employed people can invest in them.

Maximum and Minimum amount to be deposited in PPF each year

According to the Public Provident Fund Scheme (Amendment Rules 2014), while opening an account for the first time, whether on his account or on behalf of a person for whom he is a guardian, he must complete Form A and submit it along with the initial subscription amount of Rs. 100.

The Accounts Officer will open the account and issue a passbook containing all entries connected to deposits, loans, and withdrawals upon receipt of the application form. In the case of Online Banking, a Statement of Account should be issued instead of a Passbook at the account holder’s decision.

Although a PPF account can be created with just Rs. 100, the Government of India’s Public Provident Fund Act, 1968 stipulates that the minimum amount to be invested in this account each year is Rs. 500, and the maximum amount that can be put in a PPF Account each year was Rs. 1 lakh previously. In the Interim Budget 2014, delivered by Finance Minister Arun Jaitley on July 10th, this cap was raised from Rs. 1 lakh to Rs. 1.5 lakh.

Every subscription must be paid in cash, crossed check, demand draught, pay order, or online transfer to the Accounts Officer at the location of the office.

If a Public Provident Fund Account Holder fails not to deposit Rs. 500 in his account every year, a penalty of Rs. 50 will be imposed each year, in addition to the Rs. 500 in subscription arrears for that year.

The Account Holder may choose to pay this amount in 12 monthly instalments or one lump sum. HUFs were once permitted to invest, however they are no longer permitted to do so in the Public Provident Fund. If a HUF opened a Public Provident Fund Account before May 13, 2005, the account would be allowed to remain and would be cancelled after 15 years from the date of opening.

How to earn maximum PPF Interest?

As previously stated, interest on a PPF account is calculated monthly based on the lowest balance in your account between the 5th and the end of the month. As a result, if you don’t deposit any more funds in your PPF account by the 5th of the month, you won’t get any interest in them. In this situation, your lowest monthly balance will be on the 5th, and regardless of how much you deposit after the 5th, you will not earn any interest on that additional amount.

As a result, it is usually a good idea to make all further deposits before the 5th of each month to get the best interest rate.

The best approach to earn the most interest on your PPF account is to deposit Rs. 1.5 lakh before April 5th, so that you can earn interest on the entire 1.5 lakh for the entire financial year. A one-time payment made at the start of the year will help you earn the most interest possible.

If you want to make tiny deposits every year, try to do it before the 5th of the calendar month, as described above. To put it another way, if you deposit Rs. 10,000 before the 5th of every month for the next ten months, you will receive an extra Rs. 75 every month, totaling Rs. 750 per year. If you deposit this amount after the 5th, you will not be eligible for the additional PPF interest. The interest on your PPF account will be calculated in the same way as previously stated.