Public Provident Fund Scheme (PPF)

This was introduced on July 01, 1968 and is primarily meant for self-employed individuals. The salaried individuals are also allowed to make contribution to this scheme over and above their contribution to the recognized provided funds in their respective organisation.

At the option of the investor, the tenure of the account opened under this scheme can be extended by blocks of 5 years each.

A PPF Account can be opened in a Head Post Office or in a branch of SBI or its subsidiaries or at specified branches of some other nationalised banks by an individual on his own behalf or on behalf of a minor of whom he is a guardian or on behalf of a Hindu Undivided Family of which he is a member.

The minimum amount that can be contributed in any financial year is Rs.500 and the maximum amount is Rs.1, 00,000.

The following are features of PPF Account:

1. The interest is paid annually, but the rate is determined by the central government from time to time. The current rate of interest is 9.5% per annum compounded annually. The interest on PPF contributions is tax – free under section 10 fo the Income Tax Act, 1961 and the contributions towards the scheme qualify for rebate up to Rs.1, 00,000 under section 80C of the Act. All the balances that accumulate over the time are exempt from Wealth Tax also.
2. It provides liquidity as loans and withdrawals are permitted. The application for the first loan can be made in the third year from the year of opening the PPF account. That is, if an investor opened the account in say 2010-11, the application for the first loan can be made in the year 2012-13.  The interest rate would be charges at the rate of 2.00% p.a on loan taken on or after 01.12.2011. Though 1.00 % rate of interest would continue on the loan taken prior to 01.12.2011.
3. Also one can withdraw 50% of the balance amount to his credit at the end of the forth year immediately preceding the year in which the amount is withdrawn. That is on 01.04.2013 an investor can withdraw 50% of the balance standing to his credit on 31.03.2009, provided six years has elapsed from the commencement of PPF Account. Similar withdrawals can be made subsequently at three year interval with the amount loan able remaining at the 50% of the amount due to ones credit at the end of the sixth year immediately preceding the year in which the withdrawal is made.
4. A PPF account can be revived by paying a fee of Rs.10 for each year of default along with the arrears of subscription of rs.100 for each year of default. The credit balance in the PPF account is not subject to attachment under on order or decree of court with respect to any debt or other liability
5. The facility of nomination is available.