5 lesser-known facts about PPF savings scheme: Lock-in is technically not 15 yrs

The Indian government's Public Provident Fund (PPF) scheme is one of the most popular government-backed savings offerings. It offers its customers a low-risk, high-interest, and tax-friendly savings option to park their money for long-term returns.

People who want to invest their money for the long term without much intervention generally open a PPF account in search of low-risk, high-return, and low-tax investment alternatives.

India's Ministry of Finance introduced the PPF account to encourage the citizens of the nation to mobilise their savings, which were parked in their bank accounts, into an investment option with reasonable returns.

According to official data, the interest rate on a PPF account currently stands at 7.1% and is compounded annually. However, as this is a government-backed savings scheme, the interest rate is evaluated and announced quarterly, and will not change in the middle of an ongoing quarter.

Here are five lesser-known facts about PPF

1. Lock-in is technically not 15 years: The Public Provident Fund (PPF) scheme has a minimum tenure of 15 years, which can later be extended by a five-year margin upon the decision of the account holder.

A PPF account can be extended in five-year increments up to an indefinite period until the customer wants to withdraw their balance.

2. Premature withdrawal allowed after 7 years: During this 15-year period, the lock-in period is not exactly for the whole term, as the funds will be eligible for partial withdrawal after the 7th year of the investment.

So, account holders will be able to withdraw a percentage of their funds after seven years of starting their PPF account.

3. You can take a loan against PPF: The account holder will be able to leverage the PPF account to take a loan against the corpus, which is stored under the savings scheme.

According to the official norms, the account holder can obtain a loan facility against the PPF corpus if they want to withdraw their funds before completing six years of investment.

However, if the account holder wants to borrow against their PPF funds, they will be eligible to only take a loan up to 25% of the account balance in their PPF savings for two years before the loan application. The repayment tenure of the loan is a maximum of 36 months.

Mostly, people who might need their funds for some financial obligations take a loan of 25% of the balance against their total savings.

4. Can't be attached in case of defaults: According to a Gujarat High Court order, the amount which is stored in the Public Provident Fund (PPF) cannot be attached in respect to any type of debt or liability default by the account holder.

5. Can invest more than 1.5 lakh: As per the official rules of a PPF savings scheme, account holders can invest a maximum of ₹1.5 lakh per year in their accounts, which will be eligible for the prevailing interest rate.

However, if the investor chooses to allocate more funds to their PPF accounts, they can do so, but the amount on top of the ₹1.5 lakh per year will not earn any interest rate or get any tax rebate benefits.

People can invest a minimum of ₹500 per year, and a maximum of ₹1.5 lakh annually in parts or a lump sum, as per the official data.

Disclaimer: This is an educational article and should not be considered an investment strategy. We advise investors to check with certified experts before making any investment decisions.