PPF: Important Points
- PPF is a safe (risk free) and tax saving long term investment scheme.
- The interest rates of PPF remain around 8%.
- The normal maturity period of PPF is 15 years.
- PPF account can be opened by giving normal KYC documents in the post office or bank.
Most of the people in the Indian economy either prefer fixed deposits in banks to invest or those who want to take risks turn to the stock market and mutual funds. But apart from this, the government also brings different types of schemes from time to time to promote low risk investments. One of such schemes is to invest in Public Provident Fund or PPF. Investing in PPF is a great decision for most people as it is considered to be the safest savings scheme with good returns. Let us know more about Public Provident Fund investment:
What is PPF ?
Public Provident Fund or PPF is a scheme run by the government to promote Long Term Investment. This savings plan is kept in Triple E category or Exempt-Exempt-Exempt. This means that by investing in this savings scheme, you will not have to pay any tax anywhere and at any stage, from the beginning of the investment process to the time of redemption at the end.
This savings scheme was started by the Government of India in 1968 for the employees engaged in the Unorganized Sector. At that time there was no facility of pension and EPF etc. for these employees. At that time people did not have any such means by which they could get lump sum amount of any investment after retirement. Then the government started the PPF Saving Scheme and so that more and more people could be attracted towards it, this scheme was promoted as Tax Free Investment.
Public Provident Fund Account : PPF Account
Public Provident Fund Investment started by the government for long investment, under which any person can invest a part of his income through an account, it is called PPF account. This account can be opened in post office and any bank. You can also open this account with an amount of just Rs 100.
Who Can Invest in PPF: Who Can Open a PPF Account
PPF account is actually a single account which can be opened by any adult person in the name of himself or his children. Apart from this, this account can also be opened separately in the name of husband and wife. No foreigner or NRI can open this account.
PPF Period :
The period or Lock in Period of Public Provident Fund Account is 15 years. Even after this, if one wishes, one can extend this period for 5 or 5 years. After maturity, if someone does not want to withdraw money, then interest continues to be received on that amount. There is no age limit to open and operate a PPF account. But one thing to note is that you can open only one PPF account in your lifetime. If you have opened more than one account, then all the subsequent opened accounts are considered as Deactivated and no interest is paid on the amount kept in these accounts.
PPF Investment Limit : Investment Amount
You can start PPF Account Investment with a minimum of Rs 500 per annum. Thus, the minimum amount to invest in this account is Rs.500 while the maximum amount that can be invested per year is Rs.1.5 lakh (Rs.1.5 Lakh). The government also keeps on changing this limit.
Deposit Frequency :
You can invest money in your PPF account every month of the year i.e. 12 times in a year. If you want, you can deposit money even twice a month. But overall the depositing frequency cannot exceed 12.
Withdrawal from PPF:
You can normally withdraw the PPF amount after your maturity (15 years). On completion of 6 years, some part of PPF can be withdrawn by following the terms and conditions.
If you want, you can take a loan against your deposits in PPF. How much loan you can take depends on how much money you have invested in the last few years.
You can take 25% of the amount deposited in your last financial year as a loan. Before applying for PPF loan, you need to keep the following things in mind.
- At least 500 rupees have been deposited in your account regularly every year. Otherwise you may not get the loan. For its improvement, you can do this that if you have not done Minimum Amount Deposit in any previous year, then deposit it with penalty.
- If you have taken loan from PPF account for one year then you cannot apply for loan again in the same year. You are not eligible to take a fresh loan unless you have repaid the loan taken earlier in full.
- Even if you repay the loan in three months of the same financial year, you are not entitled to another loan in the same year. Even in this situation, you are eligible to take the loan in the next year itself.
- You will have to pay 2% more interest on your PPF loan amount than the interest rate available on the account. For example, if you are taking interest at the rate of 12% on your PPF account, then you will have to pay 14% interest on the loan.
- When you take a loan against your PPF account, you have to pay it within 36 months. It depends on you whether you give this loan amount to Lumpsum or give it in installment. If you do not repay the loan amount within the stipulated period, then after 36 months you will have to pay an additional interest of 6%.
Interest Rates : Interest on PPF account
The PPF Account Interest Rate is determined every year by the government. Presently this interest rate is running at 8.1%. By calculating this interest rate, this amount is added to your account statement on 31st March. On the basis of the Compound Interest Rate in your account, interest is added every year on your deposit.
Tax Benefits – Tax Exemption
According to Section 80C of Income Tax, whatever you deposit in PPF from your income, there is no tax on it. Tax Benefit can be available on income up to maximum Rs 150000 by including all investments in 80C. Apart from this, the interest earned on your deposits is also tax free.
How to Open a PPF Account –
To open a Public Provident Fund Account, you can go to any government or private bank or the nearest post office. For this you may need the following documents:
Documents Required For PPF Account
- Your passport, Aadhar card, driving license, voter card, employer’s letter, utility bill, rent/lease agreement, bank statement, ration card or signed check etc. to identify your home address, identity and signature. You can use any document.
- Your Photograph;
- PPF Account Application Form from where you are going to open the account;
- If this account belongs to a minor person, then the birth certificate or school certificate of that child can be used;
If you are opening this account online, then you can also do this work through the website of the concerned bank or post office.
Benefits of PPF Investment –
1. Long Term Investment:
PPF investment is considered to be the best investment as a long term investment. Its lock-in-period is 15 years and you cannot take any kind of withdrawal or loan before 7 years. Apart from this, due to the compound interest, this investment is considered to be a better saving scheme than the bank’s fixed deposits.
2. Good Retirement Plans: Retirement Planning
Long term investment, compound rate interest, tax free income and protection of principal amount make it a very good retirement plan.
3. Tax Free Income: Tax Benefits
The biggest advantage of this investment and its income being tax free is its biggest advantage.
4. Minimum Risk: Low Risk Investment
Being operated by the government, the amount of risk involved is negligible.
5. Easy Access: Easily accessible
You can open PPF account in any Nationalized Bank, Public Bank or in any of the selected Private Bank and Post Office. Nowadays you can open this account online also.
6. Attachmentless: No Attachment
The order of attachment of PPF account cannot even come from the court.
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