PPF or Public Provident Fund is a savings-cum-tax-saving instrument in India, introduced by the Ministry of Finance in 1968. The Public Provident Fund scheme is a long term investment, in which the government announced the interest rate every quarter and offered an attractive rate of interest on the amount invested. The interest earned on the amount of investment done in a PPF account is not taxable under Income Tax. Investment in PPF accounts is exempted up to 1.5 Lac annually under section 80C of the Income-tax Act. PPF scheme has a lock-in period of 15 years.
Continue with PPF or Close it? You will not close your PPF account, and you will continue with it. There are several benefits of PPF account that you should get while keeping with your PPF account, which are as follows:
1. Tenure of account: The PPF account has a minimum tenure of 15 years, which will extend for a block of 5 years. Till 15 years you will not be able to close your PPF account.
2. Investment Limits: PPF allows starting investment with a minimum amount of Rs. 500 and a maximum of Rs. 1.5 Lac for each financial year. Lump-sum amount or a maximum of 12 instalments can be done for investments.
3. Opening Balance for PPF account: The minimum amount of Rs. 100 is required to open the PPF account. If you invested above Rs. 1.5 Lac than there is no relaxation tax on the exceeding amount.
4. Deposit Frequency: You have to deposit at least once in a financial year for every 15 years.
5. Joint Account: You can open your PPF account on an individual’s name. A joint statement is not allowed for PPF.
6. Risk Factor is minimal: The Indian government governs PPF regulatory; it offers guaranteed returns as well as protection of your amount invested. The risk factor of PPF account is minimum.
7. Who will invest in PPF: Citizen of India will invest in PPF. NRI’s and HUF’s are not eligible to open a PPF account.
8. Loan against PPF: You can avail a loan against your PPF account between the third and fifth year. The amount which you can avail maximum amount is 25% of the 2nd year immediately preceding the loan application year. You can also avail another loan after the closure of your first loan.
9. Tax Exemption Facility: PPF is one investment that comes under the Exempt-Exempt-Exempt (EEE) category. It means that all investment that you have made in the PPF account is exempted under Section 80C of the Income Tax Act. The lump-sum amount of PPF account and interest earned is also exempt from tax.
We have seen that there are innumerable benefits associated with PPF. Alongside, let us also discuss the case when someone when to close the PPF account.
A ppf account is a long term investment plan. Five years is a minimum time. By this time, many people can have a lot of returns earned. In the case of emergency or even in case of a plan event, withdrawal is possible. Ting the knots, child’s education, health problem. Break your PPF and save yourself from the debt.
As discussed above, many people wish not to close the account. After seven years, a pre-withdrawal is possible. There won’t be any penal interest charged. In case of closure after five years, one percent deduction out of the penal interest will be deducted.
PPF is authentic and builds trust with the consumers. For this purpose, proper documents are required. The proper reason and along with evidence needs to be submitted at the bank.
Common mistake to avoid :
Many people close one account and open another one. However, this is advisable. As this can really extend the process. On average , a PPF has a locking period of about 7 years.
Common Question :
Can I have 2 PPF accounts ?
As per the guidelines, we cannot have 2 ppf accounts. An individual can only open 1 account in one bank.
At last, I would like to conclude by saying a few lines; life is uncertain. We plan so much, but we can’t save our money. There are multiple numbers of accounts. Out of them, PPF is the best. It is a long term plan which is genuine. Longer the tenure higher will be the returns. Also, risk-free returns are the best option that anyone can get. Anyone from working , non-working , self employed to under 18 can open a PPF account.
PPF is a new old age saving plan. Many people confuse PPF as a retirement plan, however, it is beyond this. The financial advisers advise to start a PPF investment as early as from their 20’s. I hope that this blog was useful and many people have got useful insights. Don’t wait and open a PPF account today. You can start with a minimum amount. Monthly regular installments will keep on multiplying and get you more returns.
Also, Public Provident Fund is an equilibrium form. People of all ages and classes can open a ppf account. Later, with good money saved you can create a back-up plan and also avail loan. The entire process is quite simple without much of a hassle. A good smooth journey and good financial history can be maintained with the help of a PPF. With the help of a PPF we can mobilize small savings scheme and accentuate our returns.
PPF being a government backed scheme makes it secure and safe. It is best for people who are risk averse. A maximum limit of 1.5 Lakh is permitted for each year which can offer a fair amount of return. Another best tip for saving money is by opening a PPF account before 31 march.
Also, make sure you are depositing the money regularly in the PPF account. With numerous benefits we also need to take care of the minute details. Regularity if the final key. Be safe and save money.