Ask any financially aware citizen of the country about safe, long-term investment choices. Chances are that they will definitely include PPF in their list. PPF or Public Provident Fund is an investment scheme backed by the government of India. It offers a host of benefits, from attractive returns to tax benefits and complete security of your capital. This makes it an ideal option for long-term investors.
If you are planning on opting for PPF or are just curious about how it can benefit you, here’s everything to know about PPF, from how it works to how it compares with other options.
Key Features of PPF
To deepen your understanding of everything about PPF, here’s a look at its features:
1. Extendable Tenure
This government-backed scheme comes with a fixed lock-in period of 15 years. Once it is over, the individual can extend the tenure in blocks of 5 years. This long tenure can help individuals create a regular savings habit and build a substantial corpus. Using a PPF calculator can help you decide how profitable it may be to extend the tenure.
2. Minimum and Maximum Principal Amount
The minimum annual deposit is ₹500, while the maximum one can invest in a financial year is ₹1.5 lakh. You can make deposits in a lump sum or in a maximum of 12 instalments per year. This makes it a suitable investment option for salaried and self-employed individuals alike.
3. Interest on PPF
The PPF interest rate is set by the Central government and revised every quarter. Currently, it stands at 7.1% per annum. This interest is compounded on an annual basis. You can use a PPF calculator to estimate your returns over time, on the basis of your contributions.
4. Eligibility Criteria
Only Indian residents can open a PPF account. One person can hold only one account in their name. However, parents or guardians can open PPF accounts on behalf of minors. NRIs cannot open a PPF account, but any account in their name can remain operational until the end of the tenure.
5. Conditional Withdrawals
Partial withdrawals from the account are allowed from the 7th year onwards. However, the amount you can withdraw is subject to certain limits, based on your previous balances. You can also avail of a loan against your PPF between the 3rd and 6th year to meet your liquidity needs.
6. Safety and Risk
PPF is backed by the Government of India, which makes it one of the safest investment avenues with zero risk of capital loss. Moreover, unlike market-linked instruments, it is not affected by market fluctuations, adding another level of capital protection.
How to Open a PPF Account?
Opening a PPF account is simple. You can open it through:
Step 1. A post office
Step 2. Any authorised bank branch
Step 3. The net banking portal of most public and private sector banks
You will need preliminary KYC documents such as Aadhaar, PAN, passport-size photos, a nominee declaration form, and a filled-in application form.
Tax Benefits of PPF**
A great benefit of PPF is that it falls under the EEE (Exempt-Exempt-Exempt) category. The contributions, interest earned, and maturity proceeds, are all tax-exempt.
- Tax Deductions against Contribution: Up to ₹1.5 lakh per annum is eligible for deduction under Section 80C of the Income Tax Act.
- Exemption on Interest Earned: The interest earned on PPF is entirely tax-free.
- Exemption on Maturity Proceeds: The returns you earn are completely exempt from tax.
A PPF calculator can help you plan contributions to maximise tax savings.
Now that you know everything about PPF’s features and its benefits, let’s see how it fares with other options.
Comparing PPF with Other Financial Instruments
Let’s take a look at how PPF stacks up against other popular investment tools:
PPF vs FD
FDs are a popular option for conservative investors. To compare PPF vs FD, we shall look at the following points:
Parameters
| PPF
| FDs
|
Taxation of Returns**
| PPF offers tax-free interest.
| FD interest is taxable.
|
Tenure
| PPF has a 15-year lock-in.
| FDs offer flexible terms (except for tax-saver FDs, which come with a 5-year lock-in period).
|
Risk
| PPF is safer and backed by the government.
| The safety of FDs depends on the issuer.
|
Suitable for
| Ideal for long-term goals.
| FDs are better for short-term savings.
|
When it comes to long-term planning, PPF vs FD leans in favour of PPF due to its tax benefits and compounding power.
PPF vs ULIP
A ULIP or a Unit-Linked Insurance Plan is a life insurance product offering the dual benefits of investment and life cover.
Let’s pit a ULIP vs a PPF on the basis of the following points:
Parameters
| PPF
| ULIPs
|
Nature
| PPF is a pure savings scheme.
| ULIPs combine life insurance with market-linked investment.
|
Risk and Returns
| PPF has fixed, secure returns.
| ULIPs have higher return potential but also come with risk.
|
Taxation**
| PPF is an E-E–E product, in regard to taxation.
| ULIP contributions are also tax-deductible. However, ULIP maturity proceeds are taxable under certain conditions.
|
Provided by
| PPF is operated by the government of India and is provided by banks.
| To buy a ULIP, you need to reach out to a life insurance company in India.
|
Flexibility
| PPF has a simple, fixed structure
| ULIPs offer multiple fund choices.
|
When you compare a ULIP vs PPF, you may think of choosing a ULIP if you are comfortable with risk and want insurance too. PPF is ideal if you are focused purely on safe, long-term savings.
PPF vs NPS
NPS is a government-backed retirement savings scheme which allows a minimum annual contribution of ₹1,000. As both are government schemes, it can be helpful to compare NPS vs PPF to see which is more suitable for you:
Parameter
| PPF
| NPS
|
Returns
| PPF offers fixed interest.
| NPS returns are market-linked.
|
Tax Benefits**
| PPF contributions are eligible for deductions up to ₹1.5 lakhs.
| NPS offers a ₹50,000 deduction under Section 80CCD(1B), in addition to the ₹1.5 lakhs deduction.
|
Suitability
| PPF is better for steady, risk-free growth.
| NPS is ideal for retirement with higher return potential.
|
In the NPS vs PPF debate, those wanting higher returns for retirement may prefer NPS, while conservative savers would stick to PPF. Using an NPS Calculator can help you compare projected growth more accurately before deciding.
PPF remains one of the most reliable and accessible long-term savings tool in India. The above information has aimed to cover everything there is to know about PPF, from features and benefits to comparisons and account opening processes. For more personalised guidance, you can reach out to a financial advisor.
** Tax exemptions are as per applicable tax laws from time to time.
Customers 
Distributor 
Partner with Us 
Employee 
