Eligibility to open PPF account - Meaning of Public Provident Fund

This article will make you understand the features, eligibility to open PPF account, and Meaning of Public Provident Fund.

What is PPF?

PPF stands for Public Provident Fund which is a long-term saving scheme. It was launched in 1969 by the National Savings Institute under the ministry of finance. The main motive of this initiative is to encourage people to save money and invest. Public provident fund current interest rate is 7.1%.


1. Risk-Return Equation (Interest on PPF)

The government decides the interest rate of the PPF quarterly. In the initial days, the interest rate was only 4.4%. However, the interest has gone through many fluctuations since then. In the year 1999-2000 the rate of interest was 12% which was the highest till date. As of April 2021, the interest rate is 6.4%. Depending on your investment this interest will be credited to your account on March 31st every year. As it is handled by the government, it is advised to be very low risk. Because of that it is considered to be one of the safest investment options.

2. Yearly investment limit

The minimum investment in PPF is Rs.500 and the maximum amount is Rs.1.5 lakh every year. More importantly, it is mandatory to invest every year for 15 years. If you miss depositing the minimum amount of Rs.500 in any year, then your account will become inactive and to reactivate it you will have to pay a penalty of Rs.500. 

3. Lock-in period

Among all other tax-saving options, this one has the longest lock-in period which is 15 years. It means that investors cannot withdraw their money before the term ends. Having said that this scheme offers an option of partial withdrawal after the 7th year onwards in case of emergency such as medical difficulties, higher education of your children.


PPF is the only scheme under the government which qualifies for EEE. EEE means Exempt-Exempt-Exempt, which is a wonderful benefit. Three types of tax exemptions, that are implied on your investment are:

  • The Principal amount – By investing the maximum amount that is Rs.1.5 lakh in PPF every year you will be eligible to claim a deduction on your taxable income and you can save tax up to Rs.46,800. This indicates that even though you are investing Rs.1.5 lakh, because of the exemption of Rs.46,800, your original investment cost will be only Rs.1.03 lakh.
  • Interest earned – Second exemption is obtained on the returns generated on the PPF account. As per the regulation, you don’t have to pay any tax on returns.
  • Maturity amount – And finally, you don’t have to pay tax on the amount that you receive on maturity. so, that’s the third exemption.

PPF Calculator – Public Provident Fund Calculator Online

Eligibility to open PPF account

–To open a PPF account, the principal rule is that you must be an Indian citizen.

— Only one PPF account can be opened in your name. In case you have a minor in your family, you can also open an account on their behalf.

–At the same time, NRIs and Hindu Undivided families(HUF) are not permitted to open PPF accounts. Although, HUF is permitted to invest in one individual family member’s account. 

— Under this Scheme, opening a joint account is not possible.

Note:- Opening charge of a PPF account is Rs.100 and you can start an investment with a minimum of Rs.500.

This is the Eligibility to open PPF account

Where and how to open a ppf account?

Public Provident Fund accounts can be opened in any bank or post office. Initially, you could open a PPF account only in nationalized banks but now private banks also provide this facility.

Click here to open a PPF account online.

Documents Required

1. Application form with details.

2. Id proof like – Aadhar Card, Pan Card or Passport.

3. Address Proof with current address or signature proof.


Is PPF the best tax-saving investment option for you?

The risk involved in PPF is almost nil because it is a government-backed scheme. If you are thinking about long-term goals, then it won’t be a smart choice. The primary cause behind this is the returns it gives you, Let’s understand it with an example. Assume you are investing in PPF for the higher education of your child. Education cost is increasing by around 10% every year and the return we get in PPF is around 7.9%. If this continues, then the final corpus for higher education could be insufficient. Moreover, the lock-in period is 15 years which is longer than all other tax-saving options.

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So if you are looking for a higher return and less lock-in period then you can opt for ELSS mutual funds. ELSS means Equity-Linked Savings Scheme, in this scheme you will receive the same tax benefits with the lock-in period of 3 years. But a word of caution, Since ELSS funds invest in the stock market, there might be a lot of fluctuations in their returns. ELSS is good for the long term as the average annual return will be around 11%. Thus if you are investing in ELSS, then do not expect the same returns every year.

Finally, you have understood the meaning, features, and Eligibility to open PPF account. This will surely help you to decide whether PPF is the best tax-saving investment option for you.


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