Amounts deposited in Public Provident Fund (PPF) accounts also enjoy sovereign guarantee of the Government of India and are fully secure.
Public Provident Fund (PPF) is considered as one of the best tax-saving investment options due to its benefits in every steps – the investment amount is eligible for tax deductions under Section 80C of the Income Tax Act, the interest earned is also tax free and so is the maturity amount. So, it is an Exempt-Exempt-Exempt (EEE) category of investment.
Moreover, amounts deposited in PPF accounts also enjoy sovereign guarantee of the Government of India and are fully secure.
However, the government has put some restrictions on PPF, because apart from the sovereign guarantee, the investors also enjoy higher interest rates and benefits like tax deductions u/s 80C and tax-free maturity. So, an earning person may open accounts for self and child, but total investments in a financial year should not cross the statutory limit, which is equivalent to the 80C limit and currently is Rs 1,50,000.
Hence, a PAN card holder cannot open more than one account in his/her name, be in the same or different bank(s) or Post Office(s). He or she may open accounts for his/her minor children, but total investments in PPF against a single PAN cannot exceed the statutory limit, which is now Rs 1,50,000 in a financial year.
While the maximum limit is Rs 1,50,000, the minimum amount needs to be invested per year is Rs 500 to keep an account active through the tenure of 15 years. After completion of 15 years, the account may be extended any number of times for a block of 5 years each.
Although the tenure of a PPF account is 15 years, but there are provision of some liquidity in form of loan facility and partial withdrawals. While an account holder may opt for loan after completion of 3 years from the date of opening of the account, partial withdrawal facility will be available from seventh year onward from the date of opening of the account.
Another important aspect of PPF is that, along with maturity amount, the amounts of partial withdrawals are also tax free in the hands of the investors, keeping the privileged EEE benefits intact even for withdrawals made before 15 years or after 7 years but before maturity.