A Public Provident Fund account (PPF account) can be opened under the Public Provident Fund scheme introduced by the Ministry of Finance in 1968. It is the most tax-efficient long-term savings scheme in India. Because it is backed by the government, it is considered a safe and low-risk investment.
What is the eligibility for opening a PPF account in SBI?
- Resident Indian citizens can open this account.
- Parents can open a PPF account on behalf of minor children.
- One person can open only one account, except in cases of parents opening PPF accounts for minor children.
How to open a PPF account in SBI Bank?
You can open a PPF account at a bank or a post office. Most PSU banks have this facility, as well as some private banks. Here we are going to discuss the process for opening the account in SBI (State Bank of India). A similar process applies for other banks as well.
- Fill Form A, and submit it at any SBI branch with the required documents.
- You can download the form online, but you have to go to the bank to submit it.
- A deposit of Rs.100 has to be made at the time of opening.
- Not all branches open PPF accounts. There are only some specified branches.
- However you can submit the documents for opening a PPF account at any branch, and they will then be transferred to the eligible branch. If you want, you can specify at which branch you want to open the PPF account.
- The bank will issue a passbook within 1-2 days.
Note – Most banks ask you to open a savings account with them while applying for a PPF account (unless you already have an account in the bank). This is because banks barely earn anything on PPF accounts.
What are the required documents to be submitted for SBI PPF account?
- One passport size photograph.
- Copy of PAN card (or form 60-61 in case of absence of PAN card)
- ID proof – PAN card, voter ID, Diving licence, or ration card.
- Residence proof – passport, ration card, electricity/water bill, gas receipt, or bank statement of the last three months.
- Carry the originals with proof copies for verification.
- Nomination form
How to make deposits to SBI PPF account?
You can deposit money both online and offline
- Transfer funds online from your savings account via internet banking. The process is similar to transferring funds to any bank account.
- View your PPF account balance and statement online from your SBI net banking account.
- Also, you can provide standing instructions for crediting your PPF account from your savings or current account on a periodic basis.
- You need to fill in the deposit slip and submit it along with cash or a check at the bank. Realisation of check may take a few days.
- Remember to keep the customer copy with you to claim tax deduction.
- You can make deposits, and update the passbook at any SBI branch.
Why is a PPF account savings tax-efficient?
- Interest earned on a PPF account deposit is fully exempt from income tax under section 80 C.
- You can also claim deposits made towards a PPF account as tax deductions.
- The whole maturity amount is tax-free.
- The government offers these tax benefits to encourage savings, particularly for retirement.
What is the rate of interest?
- Current rate of interest for the financial year 2016-2017 is 8.0% per annum (compounded annually).
- The Ministry of Finance updates and announces the rate of interest every quarter.
- The interest is paid on 31st March every year. (You can use a PPF calculator to calculate the maturity amount, and amount of loans and partial withdrawals allowed.)
What is the tenure of the investment?
- A PPF account is for 15 years.
- After 15 years, you can extend the account for one or more blocks of 5 years each, with or without additional deposits.
- Also, you can make partial withdrawals from the 7th financial year onwards.
- You can make a complete withdrawal only at maturity.
What is the deposit amount?
- For each financial year-
The minimum deposit amount is Rs.500.
The maximum deposit amount is Rs.1,50,000.
- You have to make a deposit each year for 15 financial years.
- You can make upto 12 deposits in a year.
Can you get a loan against PPF investment?
- Yes, you can avail a loan against your PPF account between the 3rd to 6th financial year.
- You have to repay it within 3 years.
Are nomination facilities available?
- You can nominate one or more persons.
- And also define the respective shares of the nominees.
Can you transfer your PPF account from SBI to other bank?
- Yes, you can transfer your account to another bank or post office.
- This service is provided free of cost.
- First, you have to make an application to transfer the account at the bank/post office where the account currently is.
- Next, the existing bank/post office has to send the original account documents, along with a cheque/DD for the outstanding balance in the account to the SBI branch specified by you.
- After SBI receives the documents, you have to submit a fresh Form A, nomination form, KYC documents, along with the original passbook at the SBI branch.
Can you close the account and withdraw the entire amount before maturity?
- It is allowed only for higher education, or in case of serious illness.
- But this is possible only after completion of five financial years, and on submission of supporting documents.
How to activate an inactive PPF account?
- Failure to make a deposit for a year makes the account inactive.
- To make an inactive account active again, you have to pay a penalty of Rs. 50 per default year, and deposit a minimum of Rs. 500 for each missed year.
You can also read about opening a PPF account in HDFC bank. It is similar to PPF SBI.
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