Public Provident Fund [PPF] - An Overview

The Public Provident Fund (PPF) is one of the most popular savings option in India and this is the tax benefit it offers - it comes under the EEE (exempt-exempt-exempt) tax status.  

This means that at the time of investment, the interest earned, and the amount that is received at maturity are all tax-exempt or free. 

PPF is an financial option that comes with a lock-in period of 15 years and the maturity date is not calculated from the date of the opening of account.

The date of calculation of maturity is taken from the end of the financial year in which the deposit was made irrespective in which month or date the account was opened. 

 It is among the few investments that not only offer you tax benefits under Sec 80C of the Income Tax Act, but also the interest income is exempted from tax.


The other advantage is that it helps to build a long term investment corpus for retirement when looked at from an interest and tax perspective.


Since its inception, the objective was to encourage savings across income classes, minimum deposit requirements are very low and affordable.

They are also tax-free accounts, easily accessible, safe being backed by the government and simple to understand, making them a popular investment avenue for a large majority of individuals in India.

PPF accounts can be opened at any nationalized, authorized bank and authorized branches, post offices and private banks as well.

These accounts can be opened by filling out the required forms, submitting the relevant documents and depositing the minimum pay-in at the authorized branches or offices for completion.

Account can be opened by cash/ Cheque and in case of Cheque, the date of realization of C​heque in Govt. account shall be date of opening of account. 

Interest rates are set and announced by the government of India. is calculated for a financial year according to the rate announced for the said year.

The interest rates are not fixed for the entire tenure of the holding while the maximum amount that can be deposited in the account is also subject to change.

All those who are employees and working with professionally managed companies, must be aware of the Employee Provident Fund (EPF).

The employer and employee equally contribute to these funds, the return of investment is interest earnings and the total amount invested by an individual gets tax exemption under section 80C.

The option to increase the employee contribution is also available where you can withdraw your PF based on upper limits and it is allowed for some specific purpose only.

If you change your job or you quit, then you can withdraw the PF or transfer with your new employer and it is also taxable if a criterion of continuous service for five years is not fulfilled apart from certain other conditions. Returns on PF are also similar to PPF.

You can always opt for the PPF scheme as a means that is to deliver for the similar purpose of investment and saving.

Though the maturity period for PPF account is 15 years as seen above, but partial withdrawal is allowed form 7th year onward subject to the prescribed specified limit.

The option of loan against your PPF account is also allowed and the same can be availed during a specific time period.

PPF is one of the best and easiest investment tool to serve your long term financial needs and its returns are completely tax free and offers you tax savings as well. 

One should invest in it though small or big but consistently and everyone should open a PPF account right when they start working and as a parent also you should open PPF accounts in your children’s name so that once they attain maturity they continue it and enjoy the benefits of the PPF account.

Post office monthly income account schemes

The Post Office Monthly Income Scheme is a scheme available to investors which gives you a guaranteed return on your investment.

It is a popular scheme with investors are rewarded with assured returns every month on their deposit and is one of the most beneficial investment options that can be procured as it offers returns, ensures that the capital invested is intact and also provides a fixed income every month. 

This scheme is provided by the Indian Postal Service and is administered by the Finance Ministry of India, making this one of the most secure options to invest in. 

Anyone who wants to generate a monthly income can open this account and then get an assured monthly income.

There are many ways to invest and you can lend money to someone to use it for a specific period of time and this will come back with an interest or you can also invest in stocks.

You get interest per year, which is payable on per month basis and you will get the interest each month from the date of making the investment, not from start of the month.

If you do not withdraw the amount for some month, it would not earn any interest and just lie there in the account.

This post office saving scheme does not come under sec 80C so there is no tax-exemption for the amount you invest in this, and interest income is taxable, but there is no TDS cut in this scheme.

You can deposit the money with cash, demand draft or local cheque and once you open a monthly income scheme account, you will be issued a scheme certificate and a passbook to record the transactions against the scheme. 

The maturity period of this scheme is for a specific period of times, you will be eligible for a bonus if you retain your scheme foe 6 years and your overall return including this bonus will be higher although there is a limit on the amount you can invest in the scheme.

You can have any number of accounts, but within the overall upper limit and you do not need to take your money out after maturity, you can leave the money in the account, but then it would earn the interest equal to saving bank account for next 2 years only.

You get withdraw from the income amount by directly going to the Post-office but you need to check if you want the income in your saving bank account. 

You need to confirm that you can provide ECS information at the time of opening the account and get the interest amount created in your Bank account.

Even though the maturity period for the scheme is fixed, there is an option to break it and take your money out.

 You can take your money only after 1 year and have to pay a penalty for early withdrawal which is as follows

If you break it within 1-3 yrs : 2% penalty on Deposit amount

If you break it after 3 yrs : 1% penalty on Deposit amount

A minor above age 10 years  can open an account on his/her own name directly, there is a limit for the amount invested by the guardian and it would not be included with guardian limi.

If you are a non-resident Indian / HUF then you  cannot open the Account.

The interest not withdrawn does not carry any interest.

You account can be transferred  from one post office to any Post office in India free of cost.

The amount deposited that is invested is exempt from Wealth Tax.

One of the benefits of having these schemes you as an investor, have the option to pick one that is most suited to their income and other requirements.

 Most individuals would prefer opting for those investment schemes that are relatively risk free, while offering guaranteed returns and although post office schemes are not very risky by nature do not offer high returns, whatever offered is substantial enough for applicants to invest high amounts in.