How To Open A PPF Account?

Aug 15, 2022

How To Open A PPF Account?

Many Indian investors who want to concentrate on long-term savings choose the Public Provident Fund (PPF) as their preferred investment option. This investment, backed by the Indian government, offers returns.

PPF returns are tax-exempt under Section 80C of the Income Tax Act. As a result, investors can save between INR 500 and INR 1,50,000 in taxes annually by making PPF investments. In addition, PPF provides services, including loans, partial withdrawals, and account extensions. You can check the interest on your PPF investment with the help of a PPF interest calculator.

Due to their inability to use EPF/GPF services, self-employed people and those engaged in unorganized sectors can consider PPF as a smart investment alternative. The central government announces and pays the interest on PPF accounts every quarter. The PPF’s current interest rate is 7.1%.

Here, we will go over the procedure of opening a PPF account in detail for the benefit of new investors.

How to Open a PPF Account?

PPF accounts can be opened by investors at any post office, nationalized bank, or a significant private bank, such as ICICI Bank, Axis Bank, and HDFC Bank. In addition, a PPF account can be opened online using the net banking feature with banks.

Investors who wish to open a PPF account online through a bank’s net banking service must have a savings account in the bank and should have activated internet banking or mobile banking services associated with the account.

The process to start a PPF account using net banking is described below:

  • Investors must log in to the bank’s web portal with their net banking credentials.
  • Locate the choice that enables the user to create a new PPF account.
  • Some banks may offer a choice between a self-account and a minor account. Users should select the option applicable to them.
  • Users must enter the nominee data, bank details, etc., to start setting up the PPF account. The interface displays some details like Permanent Account Number (PAN). Users must confirm the accuracy of all the data displayed on the screen.
  • After filling up all the necessary information, customers must enter the amount to be deposited into the PPF account.
  • For the money to be automatically deposited at predetermined intervals or in one lump payment, users can also set up standing instructions if the bank permits.
  • The user’s registered mobile phone will receive an OTP at this point. They can input this OTP or the transaction password. Following the conclusion of this action, the PPF account will be successfully formed.
  • Users must write down the account number for future reference as it appears on the screen.
  • To complete the Know Your Customer (KYC) process at the bank, some banks may ask customers to print out the information they have entered and include the reference number.

Once the PPF account is formed, the account holder receives a passbook containing records of all transactions, including subscriptions, interest, and withdrawals. However, instead of giving the account holder a physical handbook, some banks allow users to view their PPF entries online.

Eligibility Criteria for PPF Account

The requirements to open a PPF account are as follows:

  • Only Indian residents are allowed to open a PPF account.
  • If a Non-Resident Indian (NRI) opens a PPF account while being an Indian resident, the account is valid and can be active for 15 years. However, NRIs are not allowed to extend the account beyond this timeline.
  • HUFs or Hindu Undivided Families, cannot open a PPF account.
  • Each individual is allowed to have only one PPF account under their name.
  • On behalf of a minor, individuals can open a PPF account.

Documents Needed for Opening a PPF Account

While opening a PPF account, applicants must make sure that they have the following documents available:

  • PPF account opening form (Form A). This can be obtained online or at a few specific bank branches.
  • ID proof
  • Proof of address
  • The applicant’s recent photograph
  • Nomination form

Important Features of PPF Account:

Some of a PPF account’s main features are:

  • The principal and interest amounts in the PPF account are secure and because the investment scheme is government-backed.
  • Under Section 80C, contributions to PPF account for up to INR 1.5 lakh per year.
  • As PPF is in the exempt category, the accrued interest and maturity amount are tax-free.
  • Every quarter, the Indian Government announces the interest rate on PPF investments.
  • PPF returns are currently more than those of many banks’ FD rates.

Criteria for Opening a PPF Account

To open a PPF account online, an applicant must fulfill the following requirements:

  • The candidate must maintain a savings account in the respective bank.
  • The Net Banking feature needs to be turned on.
  • The applicant’s savings account should be linked to their Aadhaar number.
  • Their mobile number should be linked to Aadhaar for the application.

Is PPF a Good Investment?

Due to its 15-year lock-in duration, PPF is a tax-saving investment option typically favored by people who want to invest for the long term. Similar to PPF, there are other alternative investment options, like ELSS, that provide strong investment returns and enable individuals to reduce their tax obligations.

Other Investment Alternatives

To expand your portfolio, it is always a good idea to consider various investment alternatives. Thus, your risk is reduced and your rewards are maximized. You can make investments in safer options like fixed deposits and government bonds. Consider investing in stocks if you have a high-risk tolerance. One of the rapidly growing investment opportunities made possible by technology is P2P lending. The fixed maturity peer-to-peer investment plan from LenDenClub offers annual returns of up to 10–12% p.a. on your investment.

Conclusion

The Public Provident Fund (PPF) investment program was created to assist individuals in saving money through a secure investment vehicle that offers tax-free returns. It is a savings-cum-tax savings investment that enables investors to accumulate retirement funds while saving money on their yearly tax obligations.

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