Rule 1. Eligibility and Account Opening
– PPF designed for 15 years, extendable in 5-year blocks. – Open to all individuals, irrespective of age or existing EPF accounts. – Account initiation at post offices, banks, or online with transfers allowed.
Rule 2. Deposits and Interest
– Maximum 12 deposits per year, before the 5th for full-month interest. – Interest calculated on the lowest monthly balance. – Lump-sum deposits at the beginning of the financial year permitted. – Loans and partial withdrawals allowed under specific conditions.
Rule 3. Interest Rate Dynamics
– PPF shields from equity market volatility. – Quarterly interest rate set by the government, linked to government securities yield. – Historical rates: 4% in 1968-69 to 12% from 1986-2000. – Current (December 2023) interest rate: 7.1%.
Rule 4. Deposit Limit and Tax Implications
– Annual minimum deposit: Rs 500; maximum: Rs 1.5 lakh. – Contributions beyond limit considered irregular, attracting no interest. – Excess amounts refunded without interest.
Rule 5. PPF for Minors
– Either parent can open a PPF account for a minor. – Grandparents can open if legal guardians post parents' demise. – Grandparents can't open accounts for minors when parents are alive.
Rule 6. Number of Accounts
– Individuals can open only one account, post office or bank. – Declaration required; second account treated as irregular unless amalgamated. – Ministry of Finance approval necessary for amalgamation.
Rule 7. Premature Closure
– Premature closure now possible after five financial years. – Valid reasons: serious ailments, life-threatening diseases, or higher education. – Relevant documentation required for premature closure.
Rule 8. Nomination
– Nomination critical; fill out separate Form-E during account opening. – Application form (Form-A) does not include provisions for nominations. – Ensure a smooth process for nominees in the future.
Rule 9. Investment Recommendations
– PPF offers stability; ideal for risk-averse investors. – Long-term goals with high inflation-adjusted targets may need equity exposure. – Consider equity mutual funds, including ELSS tax-saving funds.