Everything that you need to know about Public Provident Fund
When India introduced the Public Provident Fund (PPF) in 1968, its goal was to raise small contributions for investment and profit. It is also known as an investment vehicle that lowers annual taxes while allowing one to save money for retirement. A PPF account should be opened by anyone searching for a secure investment choice that will reduce taxes and provide assured returns every financial year.
What is the importance of Public Provident Fund (PPF)?
For those who are reluctant to take chances, the PPF (Public Provident Fund) is regarded as a great investing choice. They provide consistency even though the rewards might not be extremely great because they rely on the market. Moreover, there are tax advantages and portfolio diversification when investing in PPF.
What is a PPF account?
| PPF – Key Information | |
|---|---|
| Interest Rate | 7.1% per annum. |
| Minimum Investment Amount | Rs.500 |
| Maximum Investment Amount | Rs 1.5 lakh per annum. |
| Tenure | 15 years |
| Risk Profile | Offers guaranteed, risk-free returns |
| Tax Benefit | Up to Rs.1.5 lakh under Section 80C |
A long-term investment option that provides an appealing rate of interest and returns on the money invested is the Public Provident Fund (PPF) program. There is no income tax on the interest received or the refunds. To participate in this plan, one must register a PPF account. The sum deposited over a year is eligible for section 80C deductions.
FEATURES OF A PUBLIC PROVIDENT FUND (PPF)
Term: The PPF has a 15-year minimum term that can be increased in 5-year increments at your discretion.
Investment caps: For each fiscal year, PPF permits investments starting at Rs. 500 and going up to Rs. 1.5 lakh. Investments can be made in a flat payment or in a maximum of 12 instalments.
Opening balance: Just Rs 100 per month is needed to open an account. Over Rs 1.5 lakh, annual investments are not eligible for tax savings or interest.
Deposit frequency: For 15 years, deposits into a PPF account must be made at least once annually.
Deposit methods: You have four options for depositing into a PPF account: cash, check, demand draft (DD), or online fund transfer.
Nomination: When starting an account or later on, a PPF account holder has the option to name a nominee for his account.
Joint accounts: Only one person may have a PPF account open in their name. It is not permitted to open an account in joint names.
Risk factor: PPF guarantees total capital protection and guaranteed, risk-free profits because it is supported by the Indian government. There is very little danger associated with owning a PPF account. PPF accounts are utilized as a technique for portfolio diversification by investors since their set returns make them attractive.
Tax benefit: Section 80C of the Income Tax Act of 1961 exempts the PPF interest and maturity amount from taxes.
Partial withdrawal: Starting with the seventh fiscal year, a portion of the PPF balance may be withdrawn.
CONCLUSION
PPF may be a good option if you like low-risk investing and appreciate the security offered by government-backed securities.
Reach out to FilingsFirst to know more!