PPF - What is Public Provident Fund, Features and Tax Benefits
PPF - What is Public Provident Fund, Features and Tax Benefits
May 10, 2023
5 Minutes
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.
Author
Pluto Team
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