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Public Provident Fund

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Self sufficiency of low-income group of people of India is not far away...!

The concept of Social Security is the basis of the Public Provident fund. This is the most useful investment scheme among the common people of India.

Public Provident Fund is really a perfect investment solution and social security scheme in India.

I attempt to notify authorities about some reforms needed to make this scheme a tool of income to the low and middle-class population of my nation.

A suggestion of reforms that needed is seen under the last subheading.

Employment Provident Fund (EPF) and the National Pension Scheme (NPS) are other Government schemes on par with Public Provident Fund in India

The government should encourage Public Provident as a taxless investment and the fund should use for developmental activities and avoid all other external loans of the government.

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The public Provident Fund account is one of the small savings schemes, which can start through post offices. Also it can open through Nationalized banks.

All citizen of India are eligible to open this account. One person can open only one account. But Non Resident Indians are not Eligible.

One Person can open accounts in the name of minor children too. But investment in his and dependents accounts don't exceed Rupees 150,000.

Minimum investment to this account is Rupees 500 and Maximum amount at one time and one Financial Year is Rupees 150,000.

No limit for number of transaction. It was 12 Times per Financial Year until 2018. It has changed since 2019.


Attractive Seven Features

Here, I am going to describe below about 7 seven major features that have attracted me than any other savings schemes.

Every Indian who reading this article should encourage lower-income people to open this account.

By opening it, he can invest just 500 rupees through any post offices. He can get a loan from this account from the third year.

He can partially withdraw amount from the seventh year. He can extend span of the account after 15 years of its completion and invest and earn more income without tax.

1. Tax Benefits:

One of its major feature is tax benefits. An amount up to 150,000 rupees of a person's income can exempt from tax deduction during a Financial Year.

The interest which added to the end of Financial year is Tax free and can avoid this interest from Income Tax.

At maturity, one can withdraw the money without any Tax.

2. Immunity from Attachment:

PPF account is protect from attachment as per a decree or order of a court.

It is really a big benefit. If, one person is facing liabilities from creditors, banks, co-operative banks or any other financial institutions, a court order can attach his home or any other possessions and wealth.

But his PPF account will be safe and he can depend that PPF account for his livelihood.

3. Security of Investment:


The security of PPF is assured by the Central government of India.

The amount of investing is going to the National Small Savings Fund. This fund established in 1999.

By investing in this fund, an Indian can assure his economic safety. And also the government can use this fund for the development of India.

4. Loan Facility:

One person joining in this account is eligible for a 25 % loan from this account from 3rd year onwards.

But this facility ends with the beginning of the 6th year.

This facility will help a person to find liquid funds in emergencies. He can escape from a personal loan or other types of loans with huge interest rate.

A PPF account holder will get 3 years or 36 months to close his loan which is taken from the Public Provident Fund.

He will need to pay just 1 % as interest because he will get the balance from the Interest of his investment, which is completely tax-free.

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​5. Partial Withdrawal Facility:

With the end of 5th year, an account holder is ineligible for a loan from PPF.

But he can partially withdraw up to 50 % from investment. The person is unable to reinvest the withdrawal amount. He can invest as a subscription of 150,000 per year.

One limitation of withdrawal is that he can withdraw at only one time per year.

6. Premature Closure:

One Person can close the PPF account on completion of the 5th year, in emergencies.

The proof of medical certificate is essential for the closure.

7. Extension of Tenure:

One of the greatest attractions of the PPF account is that its time extension after its tenure.

Original tenure is 15 years. But the account holder can extend the account for a term of 5 years each, without limit.

For Example, one can start a PPF account at any age as a minor with the support of his parent and can continue the account until his death.

He can nominate any number of descendants and can decide how much percentage should give for each person after his death.

Benefit Illustration

The benefit illustration of the Public Provident Fund at the Current Scenario can be seen in the table below.

* Interest rate is 7.1 during the 2nd quarter of FY 2029-21.
# This schedule can extends up-to the decision of Investor.

Financial Year

Amount Deposited (Rs.)

Interest Earned @ 7.1 % (Rs.)

Year End Balance (Rs.)

Eligible Loan Amount (Rs.)

Eligible Withdrawal Amount (Rs.)

1

1,50,000.00

10,650.01

1,60,650.01

0

0

2

1,50,000.00

22,056.16

3,32,706.17

0

0

3

1,50,000.00

34,272.16

5,16,978.33

40,162.50

0

4

1,50,000.00

47,355.49

7,14,333.82

83,176.54

0

5

1,50,000.00

61,367.74

9,25,701.56

1,29,244.58

0

6

1,50,000.00

76,374.85

11,52,076.41

1,78,583.46

0

7

1,50,000.00

92,447.48

13,94,523.80

0

2,58,489.17

8

1,50,000.00

1,09,661.26

16,54,185.15

0

3,57,166.91

9

1,50,000.00

1,28,097.22

19,32,282.37

0

4,62,850.78

10

1,50,000.00

1,47,842.13

22,30,124.50

0

5,76,038.21

11

1,50,000.00

1,68,988.93

25,49,113.43

0

6,97,261.95

12

1,50,000.00

1,91,637.16

28,90,750.59

0

8,27,092.58

13

1,50,000.00

2,15,893.41

32,56,644.00

0

9,66,141.19

14

1,50,000.00

2,41,871.86

36,48,515.86

0

11,15,062.25

15

1,50,000.00

2,69,694.78

40,68,210.64

0

12,74,556.72

Requesting Reforms for Renovation of the Scheme

  • Loan Facilities should avail throughout the tenure of the Fund. It can be limited to once per year.
  • Withdrawal Facility is now limited to once per year. Quarterly withdrawal facility should allow with the condition that withdrawal per year will not exceed beyond 50 % of the total fund value.
  • After the end of the tenure, the choice of years for extension should under the purview of the subscriber.
  • Interest is calculated every quarter and credited on annual basis. Crediting of Interest should also be every quarter.
  • A centralized account number should come for PPF among various banks and Post Offices. The transfer of PPF accounts will be easier among various institutions.
  • A website in the model of NPS Trust should form for Public Provident Fund.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2020 Indra

Comments

Indra (author) from India on September 12, 2020:

@Umesh Chandra Bhatt, Yes sir, Almost features of the scheme are very attractive.

Umesh Chandra Bhatt from Kharghar, Navi Mumbai, India on September 12, 2020:

This is a nice article regarding PPF scheme of Govt of India. What I like about it most is that the interest earned on PPF is tax free.