The Public Provident Fund (PPF) scheme has been a popular vehicle in India for long-term investments. This instrument is mainly popular for its tax exempt features. The money invested in PPF gets exemption from tax, interest earned is non-taxable and the maturity amount gets tax-exemption as well.
Apart from these benefits, PPF has many other features, which are to be known to everyone investing through it. Read through to learn the important features of the PPF Scheme and get the maximum benefits of this incredible investment instrument.
- PPF is a government-backed, long-term, retirement-savings instrument. It has a 15-year lock in period.
- PPF offers decent rate of returns and loan against the account.
- It offers E-E-E status under Section 80C i.e. tax exemption on investment, interest and maturity.
- Required minimum investment of INR 500 per annum and maximum investment of INR 1 Lakh per annum.
- The interest rate will be announced annually by the government.
- Only a resident Indian can open a PPF account. Non Resident Indians (NRIs) are not eligible to open a PPF account.
- If a resident subsequently turns into NRI before attaining the prescribed maturity period, he or she may continue to subscribe to fund till maturity, on Non Repatriation Basis.
- One can make 12 investments in one year in the multiples of INR 5.
- Incase of a shift in residence, one can transfer the account office from one place to another.
- Interest is calculated on the lowest balance credit in the account for that calendar month, between the end of 5th day and the end of the month, which will be credited at the year-end. So, the best time to make monthly investment is between the 1st and 5th of a month. If an year payment is made, April would be the best month of the year.
- Withdrawal procedure with PPF account:
- After the expiry of the 5th year from the date of subscription, the subscriber is eligible to withdraw maximum of 50% of the previous year’s balance or of the 4th year after the year of withdrawal, whichever is less. If a loan is availed against the PPF, this gets factored and reduces the balance.
- One cannot withdraw more than once a year.
- Any withdrawal needs to be applied with Form C.
- After the 15-year tenure, when the account gets matured, you can withdraw the entire balance and close or continue the account.
- PPF account is extendable, for periods of 5 years at a time. One can make deposits as usual and earn interest during the extended period. The account can again be renewed again if the subscriber wants to, using Form H.
- One can open just one PPF account in the life time. However, one can open an account on the child’s name and simply be a guardian.
In conclusion, do not make investments mainly with the purpose of saving taxes. Get in depth knowledge of the investment channels and make the best choices to plan your finances well. For more advice on personal finance, approach ArthaYantra and get to talk to certified financial planners.