Understanding: The Public Provident Fund (PPF) scheme

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Understanding: The Public Provident Fund (PPF) scheme
  • By Divya Singhal
  • 27th January, 2024
  • Banking

The Public Provident Fund (PPF) scheme, established in 1968 in India, serves as a pivotal tool for individuals seeking long-term savings and financial security. Its core objective is to encourage small contributions from individuals for investment and returns.

Significance of PPF

PPF holds significant importance in India’s financial landscape due to its safety, tax benefits, and attractive returns. It serves as a reliable avenue for building a retirement corpus while enjoying tax advantages.

Core Features of PPF

Understanding the key features of PPF is crucial for potential investors. These include the interest rate, investment amounts, tenure, tax benefits, and operational aspects of the scheme.

Interest Rate and Investment Amounts

PPF offers an attractive interest rate, currently set at 7.1% per annum, ensuring competitive returns for investors. The scheme allows for flexible investment amounts, ranging from Rs. 500 to a maximum of Rs. 1.5 lakh annually.

Tenure and Flexibility

The tenure of a PPF account is set at a minimum of 15 years, encouraging disciplined savings habits and long-term financial planning. Investors also have the option to extend the tenure in blocks of five years.

Tax Benefits

One of the most appealing aspects of PPF is its tax benefits. Contributions made towards PPF are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Additionally, the interest earned and maturity amount are both tax-free.

Operational Aspects

PPF accounts can be opened with authorized institutions such as post offices and designated banks. The account opening process is simple and requires basic documentation. Investors can manage their accounts through various channels, including online banking platforms.

Risk Profile and Security

Backed by the government of India, PPF offers guaranteed returns and capital protection, making it an ideal option for risk-averse investors. Unlike market-linked instruments, PPF provides stability and peace of mind.

Flexibility in Deposits

Investors have the flexibility to make deposits in a lump sum or in installments. The minimum deposit frequency is one deposit per year, and deposits can be made through various modes such as cash, cheque, demand draft, or online fund transfer.

Nomination Facilities

PPF accounts allow investors to designate nominees, ensuring seamless transfer of proceeds in the event of the investor’s demise. This adds an extra layer of financial security for investors and their loved ones.

Limitations of PPF

While PPF offers numerous benefits, it also comes with limitations. These include a lock-in period of 15 years, restrictions on premature withdrawals, and limitations on joint holding of accounts.


In conclusion, the Public Provident Fund (PPF) scheme remains a cornerstone of India’s financial landscape, offering a blend of safety, tax benefits, and attractive returns. By fostering a culture of disciplined savings and prudent investing, PPF plays a vital role in shaping the financial future of millions of investors across the country. As individuals navigate their financial journeys, PPF stands as a reliable ally in the pursuit of long-term financial security and well-being.

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