Public Provident Fund or PPF account, offered by various institutions including commercial lenders such as State Bank of India (SBI), is a retirement planning-focused instrument. A PPF account provides an investment avenue with decent returns coupled with income tax benefits, according to SBI's website - sbi.co.in. Individuals in their own name as well as on behalf of a minor can open the PPF account at any branch, mentioned SBI. As per extant instructions, opening of PPF accounts in the name of Hindu Undivided Family is not permitted. (Also read: How To Open SBI Public Provident Fund (PPF) Account Online)
Given below are 5 things to know about SBI's Public Provident Fund (PPF) account:
A minimum of Rs 500 subject to a maximum of Rs 1,50,000 per annum can be deposited in a PPF account. The subscriber should not deposit more than Rs 1,50,000 per annum as the excess amount neither earns any interest nor is eligible for rebate under Income Tax Act. The amount can be deposited in lump sum or in a maximum of 12 installments per year, according to SBI.
Interest rate is determined by central government on quarterly basis. At present it is 8.0 per cent per annum. Interest is calculated on the minimum balance (in PPF account) between fifth day and end of the month and is paid on March 31 every year, mentioned SBI.
The original duration of the scheme is 15 years. Thereafter, on application by the subscriber, it can be extended for 1 or more blocks of 5 years each.
Income tax benefits
Under SBI's PPF account, income tax benefits are available under Section 88 of Income Tax Act. Interest income is totally exempt from Income Tax.
Premature payment is allowed only after the account completes five years of operation under certain conditions. This is also applicable to account held in the name of minors, said SBI.