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28.  Tax Planning @ Public Provident Fund (PPF)

Certain deductions are allowed under the Income Tax Act, while computing taxable income. One such important deduction relates to contributions made to the Public Provident Fund (PPF).

An individual can make a subscription (or contribution) to the PPF, either on his own behalf or on behalf of a minor, of whom he is the guardian. Similarly, subscription to the PPF can also be made by a Hindu Undivided Family in the name of any of its members. A PPF account can be opened by a subscriber with any office or branch of the State Bank of India and any other office known as Accounts Office authorised by the Central Government to receive subscriptions under the PPF Scheme 1968. The minimum subscription that can be made to the PPF account in one year is
` 500, and the maximum amount is ` 1,00,000. This upper limit of investment up to ` 1,00,000 in one financial year is inclusive of investment for the minor child. The minimum duration of a PPF account is 15 years.

It can be renewed for a further block of 5 years thereafter, by submitting Form H. Every individual desirous of subscribing to the PPF has to apply in Form A. A Pass Book is issued to every subscriber. The details of the deposits, withdrawals, loans and payment thereof, together with interest due, are entered in the Pass Book. Subsequent subscriptions to the PPF account are to be deposited with a challan in Form B. The subscriptions for any year paid into the PPF account, have to be in one lump sum or in no more than 12 instalments in a financial year. A subscriber can apply for transfer of his account from one Accounts Office to another Accounts Office, if he so likes. The subscription can be made in cash, by a crossed cheque, draft or postal order in favour of the Accounts Office, at the place at which that office is situated.


Interest is allowed at a rate notified by the Central Government, in the official gazette, from time to time. At present, the rate of interest is 8.8% p.a. It is calculated for each calendar month on the lowest balance at credit of the PPF account between the close of the fifth day and the end of the month and is credited to the account at the end of each year. Such interest is completely exempt from income tax under the provisions of Section 10(11) of the Income Tax Act. It may be mentioned here that the amount standing to the credit of any subscriber in the PPF account is not liable to attachment under any decree or order of any court for any debt or liability incurred by the subscriber. No new HUF can now open a PPF account.

The subscriptions to the PPF account along with L.I.P., 5-year bank fixed deposits, N.S.C. VIII issue, etc., get tax deduction under Section 80C upto a maximum of
` 1 lakh.

A taxpayer can liberally withdraw money from the PPF account as per the provisions of the PPF Scheme, 1968. However, no such withdrawal is permitted for the first five years. It is only after the expiry of five years, from the end of the financial year in which the initial subscription was made, that a subscriber is permitted to withdraw some amount from the fund.

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