Public Provident Fund (PPF): Features and Tax Benefits

Public Provident Fund (PPF)

The National Savings Institute introduced the Public Provident Fund (PPF) program in 1968. It is one of the post office’s savings schemes. The government backs PPF; therefore, the returns are guaranteed. The interest rate is 7.1% for the financial year 2023–24.

It is a long-term investing strategy well-liked by people seeking to generate high yet steady returns. People who open a PPF account should focus on maintaining proper security of the principal amount.

This article thoroughly explains PPF, including its account opening process and withdrawal procedures.

What is a PPF Account?

The Public Provident Fund (PPF) scheme, is one of the most well-liked long-term saving-cumulative investment schemes, primarily because of its blend of safety, returns, and tax exemption under section 80c.

Investors use the PPF to establish a corpus for retirement by saving money regularly over a long period. The PPF is a top choice for small investors due to its attractive interest rates and tax advantages.

The current quarter’s PPF Interest Rate is 7.1% (FY 2023-24). Every year on March 31st, the interest payment is made. However, between the 5th and the 31st of each month, the interest is calculated on the minimum PPF balance.

PPF has a 15-year lock-in period. The scheme can be extended in 5-year increments. 

PPF is open to all Indian citizens. However, Hindu Undivided Families (HUFs) and Non-resident Indians (NRIs) are not permitted to open PPF accounts. It is one of the safe investment options in India.

Eligibility Criteria to Open a PPF Account?

The investor must fulfill the following eligibility requirements to open a PPF account:

  • Must be a citizen of India
  • Only one account can be opened in an investor’s name. They can, however, open a new account on behalf of a minor
  • NRIs and HUFs are not eligible to create a PPF account

To open the account, investors must complete the application form and provide the required documentation and the deposit amount.

Features of a PPF Account:

The key characteristics of PPF are listed below.

Opening Balance:

It only costs Rs. 100 per month to start the account. Investments made annually that are greater than Rs 1.5 lakh are not tax deductible and do not earn interest.

Tax Benefit:

Under section 80C of the Income Tax Act of 1961, the PPF interest and maturity amount are not subject to tax.


The PPF has a 15-year minimum term that can be increased in 5-year increments at your choice.

Deposit Mode:

You can deposit money into a PPF account with cash, a check, a demand draft (DD), or an online money transfer.

Investment Limitations:

For each financial year, PPF permits investments starting at Rs 500 and going up to Rs 1.5 lakh. Investments may be made in a maximum of 12 equal payments (installments) or in one lump sum.

Deposit Cycle:

PPF accounts require deposits to be made at least once yearly for 15 years.


A PPF account holder can nominate a nominee for his account either when the account is opened or later.

Joint Accounts:

A PPF account may only be held in one person’s name. You cannot create an account in joint names, as it is not permitted.

Risk Factor:

PPF provides guaranteed, risk-free profits and total capital protection because the Indian government backs it. Holding a PPF account carries very little risk. 

Due to their fixed returns, PPF accounts are utilized to diversify an investor’s portfolio.

Partial Withdrawal:

PPF funds can be partially withdrawn starting with the 7th financial year.

How to open PPF Account?

You have the option of opening a PPF account offline or online. Check the eligibility requirements before submitting an application for a PPF account.

Online PPF Account Creation:


Make sure your internet banking is set up to open a PPF account online using a savings account with a participating bank.


  • Use your login information to log in to your online or mobile banking.
  • Click on “Open a PPF Account” and select the option.
  • Select the “self-account” option if you create the account yourself. However, if you are opening a new account as a guardian for a minor, choose “Minor Account.”
  • An application form needs to be filled out. Enter the necessary information, including your name, address, Aadhar number, date of birth, estimated annual investment amount, and PAN.
  • You can set up a standing instruction for the bank to automatically deduct the invested amount from your account.
  • Verify the application with the OTP you received to your registered email address or mobile number.
  • You will receive a confirmation email after your PPF account has been created successfully.

Offline PPF Account Creation:


You can submit an offline application by going to the nearby post office or participating bank branch. You must submit the application form and the required documents to apply for a PPF account offline.

Taxation of Investment and Interest:

Investments in the Public Provident Fund fall under the Exempt – Exempt – Exempt (EEE) category. This indicates that all investments, interest payments, and redemptions are tax-free. Tax deductions are allowed for investments up to Rs. 1,50,000 per year under Section 80C of the Income Tax Act. 

Investors can take advantage of tax benefits by declaring their PPF investments when filing their income tax returns. Annually, on March 31st, the PPF interest is paid. 

All interest income from PPF accounts is tax deductible. Additionally, the maturity sum is tax-free at the end of the 15-year term.

Since it’s a 15-year lock-in period and has a high-risk appetite, you can prefer ELSS over PPF

As a result, PPF is a fantastic investment choice for those wishing to reduce their income tax. In addition to capital protection, the PPF account offers guaranteed and risk-free returns.

How to Withdraw Money from PPF Account?

Investors must complete Form-C to withdraw their money from PPF accounts in full or in part. To open an account, individuals must submit the form to the bank’s branch. 

There are three sections to Form C:

  • The Basic Information Section
  • The Office Use Section
  • The Acknowledgement Section.

If you want to withdraw a part or the entire balance in your PPF account, follow the below steps.

Step 1: Get the Form C/Form 3 application form for PPF withdrawal from the post office or bank where you have opened the PPF account.

Step 2: Fill out the application with all the required information.

Step 3: Submit the application to the bank or post office where you have your PPF account.

PPF Withdrawal Form:

To withdraw money from the PPF, a person must submit Form 3/Form C.

There are three sections on this form:

Section 1:

Basic information section, includes information such as:

You must include your PPF account number and the amount you want to withdraw in the declaration section. You must also include the number of actual years since the account was first opened in addition to that information.

Section 2:

Office use section, which includes information such as:

  • The date of the PPF account’s creation
  • The total balance in the PPF account
  • The date on which the withdrawal request from the past was approved
  • The total number of available withdrawals from the account
  • The amount authorized for withdrawal
  • The date and signature of the responsible party, who is typically the service manager

Section 3:

Acknowledge section, which includes information such as:

The bank details section requests information about the bank where the funds are to be credited directly or the bank in whose favor the cheque or demand draft is to be issued.

Additionally, you must enclose a copy of the PPF passbook with this application.

How to Close PPF Account?

Your PPF account balance cannot be fully withdrawn until the 15-year account term has expired, following the regulations governing PPF accounts.

You have access to the entire account balance at the end of the 15 years, can withdraw it fully, and can close the account.

You are not permitted to withdraw the entire account balance at any point before the account’s full tenure.

However, after seven years have passed, an early withdrawal of up to 50% of the account balance is permitted. This is only permitted in certain cases.

A PPF account may be closed when 15 years have passed since the account’s opening. The following steps explain how to close a PPF account at the post office:

Step 1: Complete Form C with the necessary information, then attach your PPF passbook.

Step 2: Send this to the Post Office or bank branch that handles the account.

Step 3: The account will be deactivated after processing your application. The payment will be made to the savings account connected to your PPF account.

How to Transfer PPF Account?

It is possible to transfer your PPF account from one branch of the bank/post office to another or from one branch of the bank to another at the Post Office.  The process is described below.

Step 1: Go to the bank or Post Office branch where your PPF account is.

Step 2: Request the PPF account transfer application form and fill it in with the necessary information.

Step 3: Your application will be processed by the branch representative and submitted to the new branch along with the certified copy of the account, the nomination form, the account opening application, the specimen signature, and the cheque or DD for the PPF account’s outstanding balance.

Step 4: After receiving your application and supporting documents, you must submit a new PPF account opening application along with the passbook for the existing PPF account after the new branch has received your application.

You have the option to modify the nominee at this stage.

Step 5: After processing this application, your PPF account has been successfully transferred to the new branch.

Formula for Calculating PPF Future Value:

Calculating the amount of a PPF account is done using the formula below:

FV = P [({( 1 + i ) ^n} – 1) / i ]

Here is further information:

FV = Future Value (Amount received after maturity)

P = Annual instalments by the investor

i = Rate of Interest

n = Total Number of years

Let’s use the following example to understand the formula:

For example, Rahul makes an annual deposit of Rs. 1,10,000 into his PPF Account and then takes out a loan against it. The interest rate is 7.90% (with the current interest rate being 7.10%)

How to Link Aadhaar to a PPF Account Online?

Step 1: Enter your online banking credentials.

Step 2: From the menu, choose “Registration of Aadhaar Number in Internet Banking.”

Step 3: There, enter your 12-digit Aadhaar number and select “Confirm.”

Step 4: Select the PPF account to be linked to the Aadhaar number, and then click Finish.

Step 5: To determine whether the Aadhaar linking request has been fulfilled, select the “Inquiry” option on the homepage.

How to Reactivate an Inactive PPF Account?

The actions listed below can be used to reactivate an inactive PPF account:

Step 1: Send a written letter requesting its reactivation to the bank or Post Office branch.

Step 2: Pay a minimum of Rs. 500 for each year you did not make any contributions, plus a penalty of Rs. 50 for each year you were inactive.

Step 3: Your request will be handled, and the bank or Post Office will reactivate the account.