PPF Investment 2022 – A Complete Guide

Last Update – 02 Feb 2022

PPF investment is one of the most preferred investment plans. The main reasons behind this are

• PPF Investment is eligible for tax deduction under section 80C.
• The return is fully tax-free.
• An interest rate on other investments like fixed deposit is also cut down.

Tax Benefit Under PPF Investment

Due to the tax benefit, PPF is still considered one of the main tax saving investment plans for investment portfolio.

Investment up to Rs 1,50,000 every year is allowed for tax deduction under section 80C. Any amount above this neither earn any interest nor eligible for tax deduction.

The return on PPF investment is also tax-free. So, if you compare present interest rate (6.4%) with the inflation rate ( around 5.5%), your real return will be 0.9% (near 1%).

A fixed deposit cannot match this because the return on fixed deposit is not tax-free.

PPF Investment Amount

Initially, Rs 100 is to be deposit to open PPF account. Later on, you can invest in the multiples of 5 with a minimum amount of Rs 500 per annum and a maximum of Rs 1,50,000.

You don’t need to pay in one shot, you can invest up to 12 installments of different amounts in a year.

PPF Tenure

The tenure of PPF investment is 15 years. This can be extended for 5 years at every renewal ( with or without making additional deposits). Once your account matures, you have 3 option:-

• You can withdraw your maturity amount, which will be tax-free.
• You can extend your account by 5 years without making any further contribution and continue to earn interest on it.
• Extend your account by 5 years and continue making fresh contributions, like as earlier.

PPF Account Interest Rate

Current PPF Interest rate – 7.1%

Here is PPF Interest Rate History for Last 35 Years

Year	Interest Rate
1986-2000	12%
2000-2001	11%
2001-2002	9.5%
2002-2003	9.0%
2003-2011	8.0%
2011-2012	8.6%
2012-2013	8.8%
2013-2016	8.7
1/04/2016 – 30/09/2016	8.1%
1/10/2016 – 31/03/2017	8.0%
1/04/2017 – 30/06/2018	7.9
1/07/2018 – 31-12-2018	7.8%
1-01-2019 – 30-06-2019	8.0%
1-07-2019 – 31-03-2020	7.9%
1-04-2020 Onwards	7.1%

PPF Account Opening

You can open PPF account with any nationalized bank and post office. You only have to fill the PPF form along with the required documents and photograph and deposit with the bank branch.

PPF Account Online

For online apply, download the PPF form from the bank’s website with whom you want to open PPF account (Form is easily available online). After filling the form, you have to visit the bank branch for submission.

You may also have to fill the KYC form along with PPF form ( depends upon bank policy). Once your formalities are completed, you will receive a passbook which will record all your transactions.

My Advice,  open your PPF investment account with the bank in which you already have an account. You can easily invest in PPF through online money transfer. In the post office case, you need to visit post office for deposit.

PPF Withdrawal

Partial withdrawal is allowed after the completion of 5 full financial years from the end of the financial year in which you opened PPF account.

For Example- Suppose Jatin opened the PPF account on 1 Jan 2020. On 31st March 2020, the financial year will be ended. From that time, after the completion of 5 financial years, Jatin can withdraw the money ( from 1 April 2025).

You can withdraw only once in a year.

PPF Withdrawal Limit

The amount that can be withdrawn is equal to lower of

• 50% of the account balance at the end of the year immediately preceding the current year.

Or

• 50% of the balance at the end of the 4th year, immediately preceding the current year.

Loan Against PPF Investment

You can take a loan against your PPF investment any time after the completion of 1 full financial year from the end of the financial year in which PPF account opened but before the expiry of 5 full financial years.

Let me try to make this simple

Suppose Jatin opens PPF account in Sep 2017. The end of the financial year in which PPF account was made is 31st March 2018. Expiry of one financial year from the end of that financial year makes it, 31st March 2019

So from this date onwards i.e 1 April 2019, before the expiry of 5 full financial years i.e 5 years from 31st March 2018 that brings us to 31 March 2019, Jatin is entitled to apply for a loan.

Some interesting things related to loan against PPF Investment

• 25% of the balance amount in the PPF account including interest at the end of the second year immediately preceding the year in which the loan is applied.
• Generally, the interest rate on the loan is 2% higher than the PPF interest rate.
• The principal is to be repaid within 36 months. If not repaid in 36 months, interest rate will increase to 6% p.a.
• Only after the repayment of the first loan can apply for the second loan.

PPF Account Rules

• The age should be 18 years or more.
• The applicant should be an Indian resident. NRI’s are not eligible to open a PPF account.
• Only one PPF account can be opened per person. If you have two PPF accounts, your second account will be deactivated and the only principal account will be returned.
• HUF cannot open a PPF account, with effect from 2005.
• Foreigners are not allowed to open a PPF account.

Documents Required

• PAN Card
• Aadhar Card
• Photographs
• Age proof in case of a minor child.
• Account opening form, along with nomination form if the nominee is being named.
• Bank may request KYC form or some other additional form.

FAQs Related To PPF Investment 

Q-  Is it possible to prematurely close a PPF account?

Ans- No, a PPF account cannot be closed prematurely, except in the case of account holder death.

Q- How many PPF accounts I can open at any time?

Ans- Only one PPF account at a time. You can also open PPF account for your minor child.

Q- What is the best time to invest in PPF?

Ans- The best time to invest in PPF is between the 1st and 5th of any month because interest is calculated for each month on the lowest balance in your account, between the end of the 5th day and the end of the month.

Q- What Happens if I forget to invest for one year?

Ans- Your account will be considered deactivated. In order to reactivate, you have to pay a fine of Rs 50 for each year along with a minimum Rs 500 for each year you have missed.

Q- Can I open the PPF account in the name of my minor child?

Ans- Yes, you can open the PPF account in the name of your minor child. The contribution made towards that account will be allowed for tax deduction under section 80C.

Q- If I make a contribution towards my spouse account, will this be allowed for a tax deduction?

Ans- Yes, contribution towards own account, spouse account, and minor child’s account is allowed for a tax deduction.

Q- I deposited Rs 1 lakh each in my own account and in my minor child’s account. How many deductions can I claim?

Ans- You can claim a maximum deduction of Rs 1.50 lakh despite your contribution to your and your dependent’s accounts.

Q- Can I transfer my PPF account?

Ans- PPF account cannot be transferred from one person to another but can transfer from one authorized bank or post office to another.

Q- I am an NRI, can I open PPF account?

Ans- No, an NRIs are not eligible to open PPF account. But, if you already had a PPF account, when you were resident in India then you are eligible to continue to investing in the account until it matures.

Q- How can I nominate a nominee?

Ans- Fill nomination Form-E along with the PPF application form. You can also nominate anytime after opening the PPF account.

Q- I want to change the nominee, what I should do?

Ans- Use Form F for the change in the nominee.

Q- Which is the better option between PPF and ELSS?

Ans- This is one of the most asked questions on PPF. This is a detailed discussion in itself. But I want to say something in short.

There is one thing common in between ELSS vs PPF, Both are tax-saving investments along with the tax-free returns. But both have different categories of investments.

One side PPF is fully secured but less potential investment option and on the other side, ELSS is highly potential having a higher risk.

So, it merely depends on the mindset of the investor whether he/she is a risk-taker or a secure player.

Q- Can we open PPF account in HDFC bank online?

Ans- Yes, anyone can open the PPF account in HDFC bank or any other bank through net banking.

Q- Which is the best bank to open PPF account?

Ans – PPF investment is regulated by the central government of India. So, all the banks offer same features of PPF investment.  You can open with any bank as per your own ease.

Q- What is the PPF interest rate in SBI?

Ans- The present PPF interest rate in SBI and in all other banks is 7.8%

Go for PPF if you don’t want to put money on risk. Otherwise, you can invest in ELSS funds that also offer tax-savings along with higher returns.

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