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Public Provident Fund made clear by HA TAX

PPF – Public Provident Fund

Jun 10, 2022

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Public Provident Fund Basics

It is one of the most recognised long-term investment options which offers huge and attractive interest rates and returns on the amount which is invested. The best part of this investment is that the interest which is earned is not taxable under the Income Tax. For claiming the deduction one has to open an account under the Public Provident Fund account and claim 80C deductions.

This saving is an idea which is being implemented by the Government of India with the aim to secure post-retirement life. In simple terms, one can also refer scheme as Retirement Saving Scheme. A minimum deposit of Rs. 500 to a maximum of Rs. 1.5 Lakh in a financial year per financial year one can deposit. 

This scheme gives the advantage of saving as well as tax benefits. The other benefits attached are as follows:

  • Market volatility doesn’t affect the return
  • Income Tax Deduction under Section 80C is applicable
  • One can carry out long-term investment
  • One get compounded interest rate
  • One can easily get loans and advances against the PPF account balance.
  • Investments as low as Rs. 500 can be made
  • One can partially withdraw money from the seventh financial year
  • Unlimited extension facility of Public Provident Fund account in the blocks of five years upon maturity.
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How to open a Public Provident Fund account?

The first step to avail of this saving scheme is to open a Public Provident Fund account. A Public Provident Fund account can be opened with any Nationalised Bank or with Post Office. Private Banks like HDFC, ICICI and Axis Bank are other similar banks that are authorised to provide facilities.

To open an account one has to file the application form along with other important and required documents such as Identity, signature and address proof. Additionally, some monetary charges have to be successfully carried out to open the account.

Some of the steps for an opening account online are-

  1. Log in to one’s account via the internet/ mobile banking platform
  2. Click on “Open a PPF Account”
  3. Click on “Self Account” or “Minor Account”. (Note: If the account is for oneself then click on “Self Account” or if the account is for others then click on the “Minor Account” option.
  4. Enter the details which are asked.
  5. Key in the total amount you want to deposit in the account per financial year.
  6. Click on “Submit”. For confirmation, an OTP will be sent on the registered mobile number.

The steps of opening a PPF account offline are-

  1. From the Post Office/ Bank/ Online get the hard copy of the application form
  2. Complete the form with the required details correctly.
  3. Carry out the initial deposit of a minimum of Rs. 500 to a maximum of Rs 1.5 Lakhs
  4. Once the above process is successfully carried out, a passbook will be given for one PPF account.

Once a successful PPF account will be created and the PPF Account number will be displayed on the screen. To confirm the email address, a confirmation mail will be sent to the registered email address.

Any Indian resident is eligible to open a PPF account and in the case of a minor/individual who has an unsound mind, his/her legal guardian can open an account on their behalf.

In any scenario, if one wants to transfer the PPF account to another Bank/ Post Office. With few simple steps are given below:

  1. Go to Post Office/ Bank which has a PPF account
  2. File request application form for transfer of PPF account.
  3. Post Office or Bank representative will process the application and guide you with the other formalities if required.
  4. On successful completion of the above steps, the new branch will receive an application and then subsequently guide you with the further process.

Once the application is processed, a new PPF account will be opened in the new branch.

In case one has opened a PPF account offline then Post Office / Bank will provide a passbook where all the relevant & important are given. One should get their passbook updated on a regular basis to get access to the latest data. Otherwise, one can simply log in to their account online and see all the account detail.

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Closing of PPF Account

According to the government norms, one cannot fully withdraw the PPF account balance before 15 years (its tenure period). However, in circumstances, pre-mature withdrawal can be done given the condition that only 50% amount can be withdrawn after 5 years of completion.

With a few simple steps, one can completely close one PPF account-

  1. Fill out Form C and attach the PPF passbook.
  2. Submit this to the Post Office or Bank where the account is held.

After one’s application is processed, the account will be closed. For the amount which is there in ones, PPF will be automatically transferred to the saving account.

(The PPF and Saving account will be linked)

Aadhaar is one of the important identity proofs which is recognised by the Indian Government. The data which is being collected by the Unique Identification Authority of India (UIAI), is a statutory authority which works under the Ministry of Electronics and Information Technology. Linking one Aadhaar with a PPF account is one of the important aspects.

With the simple yet elaborated steps, the Aadhaar card can be linked with the PPF account via online mode.

  1. Log in to one’s an Internet banking account
  2. Click “Registration of Aadhaar Number in Internet Banking”
  3. Enter your Aadhar number and click on “Confirm”
  4. Select the PPF account to link it to the Aadhaar number and do.

(To check if Aadhaar is linked to the PPF click on “Inquiry” which is there on the homepage)

As the PPF scheme is by the Government of India, it is standardised over all the banks and Post offices. As the interest rates are set by the Government so it doesn’t depend upon the bank or post office where the account is held by an individual.

The amount in the PPF is desired to be deposited between 1st April to 5th April (in a financial year) and in case one cannot deposit the required amount then monthly deposits within the 5th of the month should be carried out to get the maximum benefit (Note: There is no fixed number of instalments per financial year). When one fails to deposit penalty is charged (Rs. 50). So it is recommended that even a small deposit of Rs. 500 should be deposited. Upon the maturity of the account (that is, 15 years) one is eligible to get a 5-year extension (block).

In case, if one PPF account is inactive with a few simple steps one can easily re-activate-

  1. A written letter has to be given to Post Office or Bank requesting to re-activate the account.
  2. Duly carry- out formalities which are needed
  3. Post-Office or Bank authorities will review the request and proceed to re-active the account.

Minor to get their account get converted

As PPF can be opened by all residents of India, even accounts of minors can be opened up (which will be under the eyes of legal guardians). But in a state where minor status is changed to adult.

In this case, one has to submit a revised application form attaching all the required documents of the account holder (that is minor). The legal guardian along with the account’s holder has to sign a couple of documents for converting the account authority

PPF withdrawal procedure

With simple steps, one can easily withdraw the PPF amount-

  1. Form C should be filled with the accurate & relevant information
  2. Submit the form to the Post Office/ Bank (where one PPF account is opened)

 Information about Form C

Form C has three sections (1, 2 and 3 respectively).

Section 1 is the Declaration section where one provides all the relevant details with respect to the PPF account and the amount which one needs to withdraw. The relevant years of account opening and their details need to be mentioned. The next section comprises all the details which are for the office use and the last Section is for the Bank details where the money needs to be credited or the demand draft which has to be issued. (Note: A copy of the PPF passbook has to be enclosed with this too)

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