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PPF Explained: Key Rules & Regulations For Savvy Investors

The PPF, a tax-efficient savings option, offers a 15-year tenure, extendable in 5-year blocks. Whether at a post office, bank branch, or online, individuals of any age, including those with EPF accounts, can initiate a PPF account. Transfers between post offices and banks are permissible.

Depositing in PPF
With a maximum of 12 deposits annually, timely contributions before the 5th of the month ensure interest for the entire month. Lump sum deposits at the fiscal year's start are an option. The scheme allows loans and partial withdrawals.

Annual PPF Deposit Limit
While maintaining an active account requires a minimum annual deposit of Rs 500, the maximum annual deposit is capped at Rs 1.5 lakh. This encompasses both self and minor accounts. Any excess deposits beyond this limit are treated as irregular and offer no interest or tax benefits.

Number of Accounts and Irregularities
An individual can have only one PPF account, either at a post office or a bank. Having two accounts unintentionally renders the second account irregular. To rectify this, approval from the Ministry of Finance (Department of Economic Affairs) is necessary.

PPF Interest Dynamics
Being a debt-oriented asset class, PPF shields investments from equity market fluctuations. Government-set interest rates, revised quarterly based on government securities yield, currently stand at 7.1% for the December 2023 quarter in the financial year 2023-24.

Premature Closure Conditions
Premature PPF account closure, allowed after five years, is contingent on specific grounds like serious ailments or life-threatening conditions affecting the account holder, spouse, dependent children, or parents. Higher education funding is also a valid reason, requiring relevant documentation.

Nomination Process
Ensure completion of the separate nomination form (Form-E) during PPF account initiation to prevent potential legal issues for the nominee.

Investment Suitability
PPF is ideal for risk-averse investors seeking stable returns, but for long-term goals with higher inflation-adjusted targets, equity exposure through instruments like equity mutual funds, including ELSS tax-saving funds, is advisable.

PPF in Minor's Name
A guardian, either parent but not both, can open a PPF account for a minor. Grandparents can only do so if they become legal guardians after the parents' demise.