Public Provident Fund (PPF) is known as one of the most common tax-saving instruments. The main objective of Public Provident Fund is to provide an option to those salaried individuals who are not covered under EPF to save money for post-retirement. The self-salaried individuals can also open PPF account for long term saving. But prior investing in PPF scheme here we have briefly discussed 10 things to consider.
- Opening and Holding of PPF Account
An individual can open PPF account with any post office or a registered bank. Only one PPF account can be opened by an Individual. Moreover, one can also transfer the account in a simple and easy manner.
- Who Cannot Open a PPF Account?
NRIs and Hindu Undivided Families are not permitted to open PPF accounts. However, if a resident of the country becomes an NRI in the period of the prescribed term, then in such a case the NRI can continue his account till the maturity on a non-repatriation basis. Moreover, according to one’s own convenience he/she can also open a joint account.
- Minimum and Maximum deposits
Rs 500 is the minimum deposit one can contribute towards the PPF account whereas, Rs 1.5 lakh is the maximum amount the individual can contribute in a particular financial year. The maximum contribution of Rs1.5 lakhs is eligible for tax deduction under section 80C of Income Tax Act.
- How to do investments in a month
Firstly, the individual should keep in mind that the interest is calculated based on the minimum balance prevalent from the 5th day till the last day of the month. In order to maximize your profit earning it is advisable to make deposits in the initial four days of the month. The interest in compounded yearly and is not paid out.
- Returns from PPF are guaranteed
PPF scheme (Public Provident Fund) is a debt instruments that provides guaranteed returns. However, the rate of return keeps changing from quarterly because the 10- years government bond profit dropped to a certain level.
- Maturity proceedings
After the completion of 15 years of period the PPF scheme account matures. One withdrawal can be made in ppf account per year from the 7th financial year. However, at the end of the 4th year an individual can also withdraw a maximum balance of 50% or the immediate preceding, whichever is lower.
- PPF account extension availability
The tenure of the PPF account is of 15 years. However, an individual can continue the account further for 5 years without paying any additional charges. One should also keep in mind that if he/she has not made any contribution during the one year of the time period in the extended tenure, then the subscriber will not be allowed to change the term of the policy.
- EEE tax benefit
The contribution made in the PPF account has an exempt- exempt- exempt (EEE) status. This means you can get tax exemption on the contribution made up to Rs 1.5 lakh under section 80C of I-T Act, besides getting tax exemption on accumulated returns added to your PPF account during its tenure and also tax exemption on withdrawal made on maturity, making everything tax free in the hands of an investor.
PPF also known as Pension Fund, as they are created with a goal of long term return. Deposits made in provident fund are eligible for tax deduction under section 80C of Income Tax Act.
These are the certain things that are crucial to keep in mind while opening PPF account.