Public Provident Fund (PPF) is a low-risk saving scheme meant for long term investment by small investors. Any Indian citizen can start saving under this scheme and earn returns by making an investment of just ₹500 a year. The interest is determined and paid by the government and the current rate of interest is set at 7.1 percent.
Being a long-term investment scheme, one can’t withdraw the sum before the lock-in period which is 15 years. This period is extendable by five more years after maturity. However, depositors are permitted to make premature withdrawals in certain cases and are subject to certain clauses.
Understand the timing
The account matures not immediately after 15 years but on April 1 after completion of 15 years. Let’s suppose you have opened PPF on September 15, 2022. Then it will complete 15 years on Sept 15, 2037. But the maturity date will be the following April 1. So, it will fall on April 1, 2038 instead of Sep 2037.
And after completing 15 years, subscribers will have three options. First will be to close the account. Second will be to extend it for another five years without making any fresh contribution and third one is to extend it for another five years with fresh contribution.
Benefits it offers
A maximum of ₹1.5 lakh can be invested in a financial year in lump sum or instalments. Besides this, the investors enjoy tax benefits since the principal, maturity amount, and the interest earned on PPF is exempt from taxes as it comes under the EEE (exempt-exempt-exempt) category.
A PPF account can be opened with the post office or any bank that is authorised to open a PPF account. It is a simple procedure that requires filling a form provided by the opening authority and completing KYC (Know your customer) by providing supporting documents. It can also be opened online using one’s net banking portal. A nominal fee is charged to open the account.
Linking to aadhaar
It is vital to note that PPF account must be linked to aadhaar in order to avail its benefits. Besides, the new rules mandate subscribers to either provide the beneficiary’s Aadhaar number or share proof that they have enrolled for Aadhaar.
To be able to link PPF to Aadhaar, subscribers should log on to the Employees' Provident Fund Organisation (EPFO) official website and complete the process online.
PPF is a low-risk investment that is suitable for investors with a low-risk appetite and Aadhaar is one of the most important documents for the verification of identity.
So, linking these two is made mandatory by the government to curb fraudulent activities.