PPF - the Public Provident Fund is a savings-cum-tax-saving resource in India, introduced by the National Savings Institute of the Ministry of Finance in 1968. The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Central Government. Balance in PPF account is not subject to attachment under any order or decree of court. However, Income Tax & other Government authorities can attach the account for recovering tax dues.
A minimum yearly deposit of Rs. 500 is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of Rs 1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year. There must be a guardian for PPF accounts opened in the name of minor children. Parents can act as guardians in such PPF accounts of minor children. Any amount deposited in excess of Rs 1.5 lacs in a financial year won't earn any interest. The amount can be deposited in lump sum or in a maximum of 12 installments per year.
There is a lock-in period of 15 years and the money can be withdrawn in full after its maturity period. However, pre-mature withdrawals can be made from the start of the seventh financial year. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.After 15 years of maturity, full PPF amount can be withdrawn and all is tax free, including the interest amount as well
If any contribution of minimum amount in any year is not invested, then the account will be deactivated. To activate the bearer needs to pay Rs.50 as penalty for each inactive year. He/she also needs to deposit Rs.500 each as each inactive year’s contribution. In case death of account holder then the balance amount will be paid to his nominee or legal heir even before 15 years. Nominees or legal heirs are not eligible to continue the account of the deceased. If balance amount in the account of a deceased is higher than Rs.1,50,000 then the nominee or legal heir has to prove the identity to claim the amount