How to Invest in Public Provident Fund?

Investing in a Public Provident Fund or PPF is quite popular among investors owing to its numerous benefits and features. It is also considered to be one of the best ways for building long-term wealth.

Moreover, a mix of returns, tax benefits, and safety makes it a preferred option for both savings and investment for investors.

Therefore, this article will highlight all the important aspects related to Public Provident Fund investment. Scroll through!

How to Invest in PPF?

To invest in PPF, an individual first needs to open a PPF account either at a post office or a bank. Besides investing in their name, one can invest in PPF on a minor’s behalf.

A PPF account comes with a fixed tenure of 15 years. However, it can be extended for a period of 5 years by investors. Furthermore, as per Section 80C of ITA (Income Tax Act), investments made in a Public Provident Fund are eligible for deduction.

The procedure to invest in PPF is convenient and simple, and investors can go about it either through the offline or online route.

How Can an Individual Register for a Public Provident Fund Account?

As mentioned earlier, individuals planning to invest in PPF can opt for either an online or offline route to register for a Public Provident Fund account. However, before delving into the steps involved for the various routes, it is imperative to know about the documents necessary for opening an account.

Here are the required documents:

Form for opening a PPF account which is available at bank branches or on the portal of India Post
Proof of identity, which includes Passport, Aadhaar card, Voter ID card, PAN card and driving license
Proof of address like ration card, Aadhaar card, telephone bill and electricity bill
Two copies of recent passport-sized photographs
A signed cheque in favour of the investor’s account or a pay-in-slip for amount transfer to the investor’s PPF account
Birth certificate as age proof (applicable for a minor)

Investors must keep in mind that every document needs to be self-attested. In addition, you must carry all the original documents while opening an account offline.

How to Invest in PPF Online?

For opening a PPF account through the online mode, one should have a savings account made with a post office or a bank. They should also have the facility for mobile banking or internet banking enabled for their account.

You must note here that though the process for online application is different across banks, the gist of it remains the same. The steps for to create a PPF account are as below:

Step 1: Log in to your account on your bank’s mobile banking or internet banking platform.
Step 2: Select the option of ‘Open a PPF account.’
Step 3: Choose the ‘Self Account’ option if you want to open an account for yourself. On the other hand, if you wish to open an account for a minor, the ‘Minor Account’ option should be selected.
Step 4: In the application form, input and verify all the relevant details.
Step 5: This step involves furnishing the total amount which you plan to deposit into the account every financial year.
Step 6: At this point, you can set standing instructions. As a result, the amount will automatically get debited from your savings account and credited into the PPF account according to your preferred intervals.
Step 7: Submit your application at this step. For transaction authorisation, you will receive an OTP on the registered mobile number.
Step 8: Provide this OTP and confirm your identity.

After the above steps, your Public Provident Fund account would get created. You will receive a message denoting the same on your screen. For confirmation, you will also receive an email on the registered email ID.

How to Open a PPF Account Offline?

Discussed below is the process to open a PPF account through offline mode:

With the help of all relevant information, fill up the application form for opening a PPF account through an offline route.
Submit this filled-up form and all required documents at the post office or bank where you want to open your PPF account. Moreover, holding a savings account with the post office or bank branch will allow you to conveniently open the PPF account.

After completing the documentation process, along with an initial deposit, you will receive a PPF account passbook. This passbook will contain all the details, such as your PPF account number, branch name, name of the account holder, etc.

What are the Eligibility Criteria for Investing in Public Provident Fund?

The following individuals are eligible for opening a PPF account:

An individual who is a resident of India
Based on legal age proof, a minor can open a PPF account
If HUFs have a PPF account opened before May 13, 2005, they can operate those till the arrival of the maturity period, which is 15 years (without any option for extensions)
NRIs could operate their PPF account if they opened it when they were Indian residents. They can do so for 15 years without any option for an extension

How Much Can You Invest in PPF in One Year?

To keep a PPF account active, the minimum investment in PPF that needs to be made is ₹500. On the other hand, the maximum investment in PPF is ₹1.5 lakhs. Moreover, investors can make a PPF maximum investment of 12 transactions in a given year.

What is the Right Time for Investing in PPF?

Now, we will delve into the best way to invest money in PPF!

It is said that the right time for a PPF investment is during the beginning of a year. This is because an individual opting to invest in PPF in this manner will earn interest on his or her deposits for a whole year.

In addition to this, one must keep in mind that the minimum monthly balance between the last and fifth day of the month forms the basis for calculating the Public Provident Fund's interest. Therefore, if you are planning to invest in PPF on a monthly basis, it would be best to invest before the 5th of each month.

An Overview on PPF Withdrawal

An investor can opt for a complete withdrawal of balance in the PPF account after it gets matured, i.e., after 15 years get completed. So, once this duration is complete, the total outstanding amount to an investor’s credit is available for withdrawal along with its accrued interest. Additionally, one is also free to close the account at this point.

However, investors must bear in mind that if they want to make a withdrawal before a tenure of 15 years, they can opt for partial withdrawals after the completion of 6 years.

A premature withdrawal is permissible for a maximum limit of 50% of the amount present in an investor’s account at the end of the 4th year (preceding the year when the withdrawal takes place or at the preceding year’s end, whichever is lower). Furthermore, in a given financial year, withdrawals can be made only once.

On that note, this guide on how to invest in PPF comes to an end. We hope that you now know the ins and outs of opening a PPF account.

Frequently Asked Questions

✓ What will happen if an individual fails to deposit any amount in a PPF account for one or more financial years?

If an individual does not deposit the minimum amount of ₹500 at the end of a financial year, for every year of default, a penalty amounting to ₹50 would be levied.

✓ How can an individual extend the tenure of a PPF beyond the maturity period?

Investors can extend a PPF investment’s tenure beyond the maturity period for a block period of 5 years by submitting Form 4 within 1 year from the maturity date.

✓ Can an investor opt for a loan facility on a PPF investment?

Yes, investors can opt for a loan facility between the 3rd and the 6th financial year.