The Public Provident Fund (PPF) is a popular government savings scheme that guarantees a secure future and tax-free returns for every Indian investor! Offering a fixed annual interest rate of 7.1%, set by the Ministry of Finance, this scheme is an excellent means of building exceptional long-term wealth with low risk. Deposits can range from a minimum of ₹500 to a maximum of ₹1.50 lakh in a PPF account. Learn more about the maturity period, investment rules, and loan facility of this powerful scheme.
PPF Account
The Public Provident Fund (PPF) is a highly secure savings scheme run by the Government of India. Its biggest advantage is that every penny deposited in it is completely safe. This account can be easily opened at any bank or your nearest post office.
Deposit Terms and Conditions
The minimum annual deposit amount under this scheme is ₹500. You can deposit this amount as a lump sum or continue investing in up to 12 installments. The monthly installment can be as low as ₹50. You can deposit a maximum of ₹1.50 lakh in a financial year. This ₹1.50 lakh limit also entitles you to tax exemption under Section 80C of the Income Tax Act.
Account Closure Risk and Reactivation
There’s one thing you need to be especially careful about regarding your PPF account. If you fail to deposit even the minimum ₹500 in a year, your account will be closed. However, it can be reactivated by paying a prescribed penalty.
Maturity and Term Extension Rules
The PPF account matures in 15 years. After 15 years, you can withdraw the entire deposit amount, including interest. If you wish to continue investing in this scheme after 15 years, you can extend it for 5 years each year by filling out a prescribed form. This option provides you with the exceptional benefit of tax-free compound interest over a long period.
Interim Withdrawal and Loan Facility
You cannot withdraw any money for five years after account opening. Even after five years, partial withdrawals are permitted only in certain circumstances, such as serious illness, children’s higher education, etc.
In addition, PPF account holders also have access to a loan facility. This loan facility is available between the third and sixth years of account opening, allowing them to meet unexpected financial needs.
15-Year Return on a ₹2,500 Monthly Investment
Let’s understand the maturity benefit of consistent investment in PPF with a concrete example. If you deposit ₹2,500 every month into your PPF account, your annual investment will reach ₹30,000. Assuming the current annual interest rate of 7.1 percent, you will receive a whopping ₹813,642 after a maturity period of 15 years. Your total investment of this extraordinary amount will be ₹450,000, while you will receive ₹363,642 in interest. Thus, PPF helps you grow your capital safely and profitably over the long term.