Public provident fund or PPF is a popular investment option under small savings schemes. It was started in 1968 so that people can be motivated to save and invest. This is a safe and tax investment option, which also helps in creating retirement corpus.
The PPF scheme is done for a long period of time. It provides interest at an attractive rate on the amount invested. The interest and returns you earn are not taxable under this scheme.
You will have to open a PPF account under this scheme and you can make tax deduction under Section 80C for the amount deposited during one year. Let's take all the important information about PPF.
How to Open a PPF Account
A PPF account can be opened by any authorized private or public bank or Indian Post Office. To open a PPF account, you will have to submit an application form and some required documents like KYC papers, your identity card, proof of address and your signature. With these documents, you will have to deposit the amount of work worth Rs. 100 from work.
How much interest will you make on PPF investment
You will earn 7.9% interest rate on deposits made in public provident fund from July 1, 2019.
Who can invest in PPF
Any Indian citizen can invest in PPF. A citizen can have only one PPF account, but if the account is under the name of a minor then one parent can have a name together. NRI and HUF are not eligible to open PPF account.
Some important features of PPF
The minimum period of PPF is 15 years, which can be extended in the 5 year block after completion of the period.
You can invest up to Rs 500 and up to 1.5 lakhs in PPF in each financial year. The investment can be done in lump sum or up to 12 installments.
One interesting thing to open a PPF account is that you can open it from just Rs 100. But note that if you invest more than Rs 1.5 lakh in a year, you will not get interest on it nor you can make any tax benefit on it.
You will have to deposit some amount in a PPF account at least once a year for 15 years. You can do this through cash, check, demand draft or online fund transfer.
You can enroll any person after opening a PPF account. A PPF account can only be named after one person. Opening of account is not permitted in joint names.
You can get a loan against your PPF balance between the third to the sixth financial year. Apart from this, you can withdraw partial amount from the PPF account from the seventh financial year.
PPF Tax Benefits
PPF is an investment option that falls under the Exempt-Exempt-Exempt (EEE) category. In other words, it means that all the investments made in PPF are tax-free. Apart from this, all the deposits made in the PPF are taxable under Section 80C of the Income Tax Act.
Remember that the PPF account can not be closed before time. Only the account holder can apply to close the account on the death of the account holder. If you are looking at safe investment options, in short, small savings schemes are a good option.
