PPF - What is Public Provident Fund, Features and Tax Benefits

PPF - What is Public Provident Fund, Features and Tax Benefits

Exploring PPF - Public Provident Fund: A Comprehensive Guide

Understanding PPF

PPF's full form is the Public Provident Fund, a favored investment scheme known for its investor-friendly features and associated benefits. It stands as a long-term investment option, attracting individuals seeking stable yet high returns with a focus on safeguarding the principal amount.

Importance of a PPF Account

A Public Provident Fund scheme is particularly ideal for individuals with a low-risk appetite. Mandated by the government, it ensures guaranteed returns and is not subject to market fluctuations. This makes it a secure choice, offering stability in annual returns, especially during economic downturns.

Features of a PPF Account

- Interest Rate of PPF

7.1% per annum

- Tax Benefit

Up to Rs.1.5 lakh under Section 80C

- Risk Profile

Offers guaranteed, risk-free returns

- Minimum Investment Amount

Rs.500

- Maximum Investment Amount

Rs.1.5 lakh per annum

- Tenure

15 years

- Investment Tenure

The lock-in period of 15 years; extendable by 5 years

- Principal Amount

Minimum: Rs.500; Maximum: Rs.1.5 Lakh per annum

The investment must be made annually to keep the account active.

- Loan against Investment

Available after the 3rd year and up to the 6th year

Maximum loan tenure: 36 months

Maximum loan amount: 25% of the total available balance

- Eligibility Criteria

Indian citizens, including minors operated by parents

Non-residential Indians not eligible for new accounts

- Interest in a PPF Account

Interest rates: 7.1%, subject to quarterly updates

How to Open a PPF Account?

Both offline and online procedures are available for opening a PPF account. Online activation involves visiting the website of a selected bank or post office. Required documents include KYC documents, PAN card, residential address proof, nominee declaration form, and passport-sized photographs.

PPF – Tax Benefits

Income tax exemptions are applicable to both the principal amount and the interest earned in a PPF account. The entire investment amount qualifies for tax exemption under section 80C of the Income Tax Act of 1961, with a maximum limit of Rs.1.5 Lakh per annum. The interest accrued is also exempt from taxation.

Withdrawal

Withdrawal from a PPF account involves a mandatory lock-in of 15 years. However, partial withdrawals can be made for specific end-uses after the completion of 5 years. Up to 50% of the total balance can be withdrawn annually from the 4th year onwards.

Loan Against PPF Scheme

Between the third and fifth years of a PPF account, a loan can be taken, capped at 25% of the second year's balance.

Procedure to Withdraw PPF Money

To withdraw from a PPF account, complete Form C with the necessary information and submit it to the bank branch. Form C includes sections for personal details, office use, and banking information for direct credit or cheque issuance.

In conclusion, the Public Provident Fund (PPF) emerges as a secure and beneficial long-term investment option, offering stability, tax benefits, and flexibility for loans and partial withdrawals. It stands as an attractive choice for individuals seeking guaranteed returns and tax savings.


Exploring PPF - Public Provident Fund: A Comprehensive Guide

Understanding PPF

PPF's full form is the Public Provident Fund, a favored investment scheme known for its investor-friendly features and associated benefits. It stands as a long-term investment option, attracting individuals seeking stable yet high returns with a focus on safeguarding the principal amount.

Importance of a PPF Account

A Public Provident Fund scheme is particularly ideal for individuals with a low-risk appetite. Mandated by the government, it ensures guaranteed returns and is not subject to market fluctuations. This makes it a secure choice, offering stability in annual returns, especially during economic downturns.

Features of a PPF Account

- Interest Rate of PPF

7.1% per annum

- Tax Benefit

Up to Rs.1.5 lakh under Section 80C

- Risk Profile

Offers guaranteed, risk-free returns

- Minimum Investment Amount

Rs.500

- Maximum Investment Amount

Rs.1.5 lakh per annum

- Tenure

15 years

- Investment Tenure

The lock-in period of 15 years; extendable by 5 years

- Principal Amount

Minimum: Rs.500; Maximum: Rs.1.5 Lakh per annum

The investment must be made annually to keep the account active.

- Loan against Investment

Available after the 3rd year and up to the 6th year

Maximum loan tenure: 36 months

Maximum loan amount: 25% of the total available balance

- Eligibility Criteria

Indian citizens, including minors operated by parents

Non-residential Indians not eligible for new accounts

- Interest in a PPF Account

Interest rates: 7.1%, subject to quarterly updates

How to Open a PPF Account?

Both offline and online procedures are available for opening a PPF account. Online activation involves visiting the website of a selected bank or post office. Required documents include KYC documents, PAN card, residential address proof, nominee declaration form, and passport-sized photographs.

PPF – Tax Benefits

Income tax exemptions are applicable to both the principal amount and the interest earned in a PPF account. The entire investment amount qualifies for tax exemption under section 80C of the Income Tax Act of 1961, with a maximum limit of Rs.1.5 Lakh per annum. The interest accrued is also exempt from taxation.

Withdrawal

Withdrawal from a PPF account involves a mandatory lock-in of 15 years. However, partial withdrawals can be made for specific end-uses after the completion of 5 years. Up to 50% of the total balance can be withdrawn annually from the 4th year onwards.

Loan Against PPF Scheme

Between the third and fifth years of a PPF account, a loan can be taken, capped at 25% of the second year's balance.

Procedure to Withdraw PPF Money

To withdraw from a PPF account, complete Form C with the necessary information and submit it to the bank branch. Form C includes sections for personal details, office use, and banking information for direct credit or cheque issuance.

In conclusion, the Public Provident Fund (PPF) emerges as a secure and beneficial long-term investment option, offering stability, tax benefits, and flexibility for loans and partial withdrawals. It stands as an attractive choice for individuals seeking guaranteed returns and tax savings.


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