PPF – All you wanted to know

The Public Provident Fund (PPF) scheme is one of the most popular investments in India today. It provides tax deductions, the maturity proceeds along with
interest are exempt from tax. It is a safe instrument that cannot be attached in case of any debt or liabilities. Here I will try to answer all the questions regarding Public Provident Fund (PPF).

What is PPF all about

Public Provident Fund (PPF) is a scheme by Central Government. PPF is a Government-backed, long-term small savings scheme. Initial purpose was to provide retirement security to self-employed individuals and workers in the unorganised sector as they did not had EPF (Employee Provident Fund) option.

But gradually PPF became everyone’s favourite investment product. It helps in accumulating a safe corpus. One can earn tax-free rate of return, and enjoying tax benefits. then PPF is for you. Above all, it gives you peace of mind as your money is safe from default.

PPF Interest Rate

What is PPF Interest Rate

7.1 %

How PPF Interest Is Calculated

The interest on PPF is calculated on a monthly basis but credited to the account at the end of the financial year. The interest is calculated between the fifth and last day of a month.

So to maximise returns, you should invest in a PPF account on or before the 5th April if doing lumpsum investment. This will give you maximum interest for the year.

Else next better option is investing before 5th day of any month if doing investment in regular manner.

PPF Tax Benefits

What is limit of PPF investment for Tax Benefit

The deductions under PPF can be claimed by anyone for limit of Rs.1.5 lakhs (from FY 2019-20).

PPF offers Tax Deduction Under Which Section

PPF contributions made every year are eligible for tax deductions under Section 80C.

PPF Account Opening

How many PPF account one can open

An individual cannot have more than one PPF account. If more than account is opened by mistake, other account will be closed without any interest.

Premature Closure of PPF Account

Can PPF Account be closed

Premature closure of the PPF account is allowed only 5 financial years after the account is opened. It is only allowed in below conditions:

  1. Life-threatening ailment or serious diseases faced by account holder/spouse/children
  2. Children’s or account holder’s higher education: Documents confirming admission in a higher education institution have to be produced
  3. Change in resident status of account holder (becoming an NRI)

In case of premature PPF account closure , a penalty is levied in the form of a 1% reduction in the interest applicable for the period for which the account is held.

For example, if you have earned interest of 7.1% per annum for five years on the PPF account, the interest for each year will be reduced to 6.1%.

..post to be updated

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