Public Provident Fund (PPF) not only allows you to maintain a savings account with enhanced benefits, but also provides you with tax exemption up to Rs. 1, 50,000 in a financial year under section 80C of the Income Tax Act, 1961.
PPF is a widely popular investment scheme, backed by the government of India. A PPF account online enables you to earn an annual interest of 7.6% (as on January 1, 2018) on your annual savings, starting from Rs. 500 subject to a maximum of Rs. 1, 50,000 a year. PPF interest rate is subject to change every quarter and further calculations are done accordingly.
How do I open a PPF account?
You can open a PPF account at any public section bank, including State Bank of India (SBI). If you have a SBI savings account, then you can quickly access your PPF account online right on your Internet Banking portal. In the other case, you have to open a SBI savings account. All you need to provide is your recent passport size photographs, self-attested copy of your PAN Card and Aadhaar card. Also, make sure to carry your original documents handy as a proof of authenticity of the provided documents. Apart from this, you need to know certain other things before you even apply for a PPF account.
Here are 10 things you need to keep in mind about PPF account in State Bank of India:
- PPF Account Eligibility
In accordance with the SBI’s website, you can open a PPF account in your name as well as on behalf of a minor in your family. However, you cannot apply for a PPF account in SBI on behalf of a Hindu Undivided Family (HUF), as per extant instructions.
- PPF Investment Limit
In a financial year, you can deposit a minimum of Rs. 500 subject to a maximum of Rs. 1, 50,000 in your PPF account. This is because any deposit in a PPF account provides you tax exemption under section 80C of the Income Tax Act, 1961. And, you cannot avail tax exemption up to over Rs. 1, 50,000 under IT section 80C. A PPF account permits a maximum of 12 transactions in a financial year or you can deposit the entire amount as a lump sum in your PPF account.
- PPF Tenure
The original tenure of the PPF scheme is 15 years, which you can extend, as per your requirement, for one or more times. Each extension period is of five years.
- PPF Rate of Interest
The PPF rate of interest is subject to change every quarter, as it is determined by the central government. The updated PPF interest rate is 7.6% as on January 1, 2018. The interest is compounded annually and is payable on 31st March. Interest calculation is subject to the amount available in the PPF account between 5th and last day of the month.
- PPF Withdrawal and Loan
The PPF account comes with a lock-in period of 15 years. However, partial withdrawals are allowed from the 7th year of the account. You can also apply for a loan against your PPF account subject to the age of the account and the current account balance.
- PPF Tax Benefit
The amount of money deposited in your PPF account, subject to a maximum of Rs. 1, 50,000, is fully exempted from income tax under section 80C of the Income Tax Act, 1961. The interest earned on PPF account is also tax-exempted under section 88.
- PPF Nomination
The State Bank of India facilitates one or more nominations for your PPF account. You can include your nominee information within your PPF account details. In case of more than one nominee, you are allowed to define the shares of individual nominees.
- PPF Account Transfer
If you have a PPF account in SBI and you want to transfer it to some other SBI branch or other bank or post office, then you are allowed to do so. All you need to do is submit an application to the bank and the entire process is free of charge.
- PPF Premature Payment
You are allowed to make premature payment from your PPF account or the account of a minor account-holder of whom you are the guardian, only after the completion of 5 financial years. However, the amount should be required either a) for the treatment of a serious or life-threatening of the account holder, spouse, children, or dependent parents on producing one or more supporting documents, issued by a competent authority (like a hospital) or b) for the higher education of the account-holder or minor account-holder on producing one or more supporting documents, such as fee receipts/admission confirmation in India or abroad.
- What’s New
National Savings Institute, working under the Ministry of Finance, implements the PPF amendment scheme and other savings schemes. State Bank of India requests people to visit their website directly for more information regarding such schemes. In recent times, the government of India put forward a new bill targeting to merge PPF and other small savings schemes, which on providing PPF account details of the customers will operate under one act.