It doesn’t matter how much you earn, if in the end you are not left with any saving. Here, comes one of the most popular scheme ‘PPF’. Public Provident Fund scheme is long term investment facilities given by the Government of India. There are numerous benefits of PPF accounts. It offers security with an attractive interest rate and returns as well. PPF are fully exempted from Tax. Investors also get perks from it such as loan, withdrawal and extension of account.
Public provident fund was introduced in India in 1968. It objective is to mobilize small saving in the form of an investment, coupled with a return on it. PPF is also known as savings-cum-tax savings investment vehicle. Which enables you to build a retirement corpus while saving on annual taxes.
Now we are going to discuss some benefits of PPF which will never let you regret as your bad investment decision.
PPF is under Indian government, so it is regulated by the government which definitely reduces risk and assure security. It offers you assured guaranteed, returns which don’t involve risk and complete capital protection. There is no risk of fraud in it. The element of risk involved in having a PPF account is next to minimal.
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PPF are tax deductible up to Rs 1,50,000 annually, under Section 80 C of the Income Tax Act 1961. The interest on the public provident funds are totally exempted from tax. The maturity amount is exempt from tax too. Therefore, public provident fund has an Exempt-Exempt-Exempt model. This proves that it is one of the most tax efficient investments.
Little savings with good return
Public provident funds gives you full flexibility in investment amount. You can open account just by 100 Rs. Every year you can invest minimum 500 to maximum 1,50,000 Rs. You can make these investments, maximum of 12 installments or just in full amount as well called lump sum. Public provident fund offers an interest rate of only Rs. 7.6%, compounded annually.
PPF also gives you loan facilities. If you are having a PPF account you can easily get loan against it, from 3rd to 6th year of account opening. The maximum amount of loan that can be availed against PPF accounts is 25% of the balance. But it should be in the end of the 2nd financial year preceding the year in which the loan was applied for.
The PPF has a lock-in of 15 years. Partial withdrawals can be made from the expiry of 5th financial year after the year in which the account is opened. For example, if the account was opened on Jan 1, 2012 (Financial year of 2012-2013), withdrawal can be made from the financial year 2019-20 on wards. Only one partial withdrawal is allowed in one specific financial year. The maximum amount that can be withdrawn in one particular financial year is the lower are as follows:
- 50% of the account balance as at the end of the financial year, preceding the current year.
- 50% of the account balance as at the end of the 4th financial year, preceding the current year.
After such facilities given by our government every one should have a PPF Account as you can see there are huge benefits of PPF accounts. Still you have any doubt or confused how to open that account. Just let us know in comment section below.