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Best way to utilize your PPF Account


After coming into an industry of work or getting to know more about your salary structure, we come across a term known as PF – Provident Fund or the other name given to it is Employee provident fund. The purpose to provide this account is to save the employee with a lump sum amount after their retirement from the employment. The PF account includes the contributed amount from both the employer and the employee. It is a long term saving – cum – tax saving instrument for the retirement.

There comes another term called PPF or Public Provident Fund. PPF includes the self contribution to secure a good retirement corpus. PPF account can be opened with any Bank or post office by anyone. The best part to save in this is that this amount is always tax exempted. There is a lockin period of 15 years and can be extended in the blocks of 5 years after maturity. It is a great financial saving instrument that not only provides tax benefits but also helps to create a safe zone post retirement. The account is not only used for saving but it also returns you with an additional benefit of 8% interest on the deposition. However, the interest rates may vary depending on the current market situations or as per the notifications issued by the government in this context. IT Act under 80C allows the consumer to deposit 1.5 lacs per annum as a deduction.

The main difference between PPF and EPF is that PPF is completely managed by you and EPF is a mix contribution of the employee and the employer. Let’s read ahead and know more about the PPF Account and how it benefits it’s consumers.

Eligibility Criteria

Being established by the central government, the self-employed, salaried as well as un-salaried people who fall in unorganized sector are also eligible to open a PPF account in any nearby branch of the nationalized Bank, authorized private bank or post office and can earn the assured high returns. It can be opened even for minors. PPF account has a limit to deposit only 1.5lac maximum per year.


At present the interest rates offered for the PPF account holders is of 8%. The interest rates offered are solely linked to the 10-year government bonds. However, there can be changes in the interest rate percentage depending on the market situation but as the government bonds are quite trustworthy and has low risk in their financial products, the returns generally remains the same.

Tax Benefits

The total annual contribution qualifies for tax deduction under section 80C of Income Tax Act. The tax benefits are limited to 1.5 lacs every year. Contribution made by spouse and children are also eligible for tax deduction. Interest given on the deposited amount is also exempted from income tax.

Loan against PPF Account

The borrower is eligible to borrow a loan of 25% of the balance amount available in the PPF account after the completion of second financial year till the end of the sixth financial year.

For example, if the account was opened during the financial year 2014-15, then the account holder can apply for a loan from the financial year 2016-17 (April 1, 2016) and repay before 2019-20 (March 31, 2020).

The loan has to repaid within 36 months and can be borrowed only once in a year. This means, only after the completion of your old loan completely you can apply for a new loan.

Partial Withdrawal

A PPF account has a lockin period of 15 years to be mature. But the account holder can make one partial withdrawal each year after the completion of sixth year of opening the account. The withdrawals are also tax free.

The withdrawal limit is limited to 50% of the total balance at the end of the fifth year immediately preceding the year of withdrawal.

Account Extension

The account holder can retain the PPF account even after maturity without making any new contributions. This way the balance in your PPF account will continue to earn interest for you until it is closed. However, in case you want to keep depositing in your PPF account after the maturity, you can easily ask to extend the tenure in the blocks of five years. There is no limit to the number of times on the extension of the account.

Reactivate PPF Account

The account holder is eligible to borrow a loan or partial withdrawal facilities only when the PPF account is active. The account becomes dormant if a minimum amount of Rs. 500 per year is not deposited in that account.

In case when the account becomes dormant, to reactivate your account, you can simply visit the branch of the Bank or post office where the account was opened and submits a written request for activation. The bank might charge a small penalty of Rs. 50 for every financial year the account was not active.



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