7 things you should know about public provident fund (ppf)

public provident fund (ppf) is one of the most popular savings schemes. it is a government-run savings scheme which can be accessed by salaried and self-employed individuals.

this scheme was launched to provide social security to workers, be they salaried or self-employed, during retirement. you can start small with this scheme, with a minimum investment amount of ₹100. the ppf scheme has a lock-in period of 15 years, and the amount invested is eligible for deduction from the total gross income under section 80c.

many people are hesitant to invest in this scheme as it has a long maturity period. however, the government has recently allowed premature closure of ppf accounts. you will still need to hold on to the ppf for five years before you can close it.

before you invest in ppf, here are 7 things you should know:

1. minimum amount to be invested

the minimum amount to be invested under this scheme is ₹100. a ppf account can be opened by both salaried as well as self-employed individuals, the state bank of india (sbi) branches, associated banks, and post office branches.

2. maximum and minimum deposit limit for ppf

a minimum of ₹500 has to be deposited in a ppf account in a financial year, and the maximum one can deposit in a financial year is ₹1,50,000. you can make these deposits either in a single instalment or multiple instalments. these instalments are flexible, meaning you can deposit any amount in each deposit. you can deposit up to 12 instalments with varying amounts, as long as you don't make more than 12 deposits in a financial year.

your account can be discontinued if you fail to deposit the minimum amount, even though your interest continues to accrue. you can activate your account again by paying a default fee.

3. interest calculation

interest is calculated on the lowest balance between the fifth and the last day of the month. the best way to raise money is to deposit the money between the first and the fifth day of the month.

4. premature withdrawal

generally, you can withdraw the entire amount in your ppf account only after the maturity period. in times of crisis, partial withdrawals are permitted up to certain limits. after 7 years, you can withdraw once a year. the withdrawal amount must not exceed 50% of the balance at the end of the fourth year, or 50% of the balance at the end of the preceding year, whichever is lower.

in the past, only in the case of death was premature closure of ppf allowed. the government has recently allowed premature closure of ppf after 5 years.

5. tax benefits

the amount invested under ppf is deductible from the total taxable amount under section 80c of the income tax act. the interest earned from the ppf account is also exempted from income tax.

6. loan on ppf account

you can apply for a loan on your ppf account. loans can be taken from between the third year to the sixth year. a maximum of 25% of total balance at the end of the second immediately preceding year can be taken as a loan. the loan should be repaid within 2 years.

7. ppf extension

you can extend your ppf account can be extended for any period in a block of 5 years. the remaining balance in your account will continue to earn interest till the closure of your account. during this period, only one withdrawal is allowed per year.

the ppf is a stable, popular investment and savings choice for millions of indians. to project your returns from this scheme, try the cred ppf calculator.