The practice of saving systematically and regularly can be linked to wealth creation. With a regular saving, whether it is a small or a huge amount, you can earn a handsome return. In addition, when it comes to expecting a good return, long-term investments are mostly preferred by the investors. In this regard, the Public Provident Fund or PPF is one of the options that worth your money. Coming under the umbrella of government undertaking schemes, PPF offers tax benefits as well. Hence, you must know some facts about PPF Scheme and its benefits before investing in it. Here we go:
Start Your Investment with a Minimum Amount
The best part of PPF account is, it can be opened with a minimum amount of Rs. 100. Isn’t it affordable? Whether you’re self-employed or a salaried person, you can open a PPF account at any bank branch, provided you have a saving account with that bank. Some nationalised banks that have emerged with PPF scheme include State Bank of India, Bank of India, Central bank of India and Bank of Baroda. Moreover, you can open it with a general post office as well. A PPF account may also be opened on behalf of a minor child to whom you are a guardian.
PPF Account Comes with Minimum and Maximum Deposit
The account holder must maintain a minimum deposit of Rs. 500 annually. The maximum that one can be deposit is Rs. 1,00,000 in a fiscal year. There is an option of instalment as well where one can pay the deposit in breaks, but not more than 12 instalments. However, if one fails to pay the minimum amount, the account will be discontinued. After paying the required amount with a penalty, one can continue with the same.
PPF Account Interest Calculation
The banks calculate the PPF Interest in your account basis on the lowest balance available between the fifth and the last day of a particular month. So, it is advised to make deposits between 1st and 5th of the month to make maximum out of your PPF account. Moreover, it is compounded in every year.
Though one can’t withdraw the invested money before the maturity, premature withdrawal is permitted up to a certain ceiling limit if the market hits with a financial crisis. The account holder is allowed to withdraw his/her money once in a year, after continuously investing for 7 years. However, the withdrawal amount must not exceed the 50% of the total balance in the account in the last months of the fourth year. Mostly, premature withdrawal is admissible only in the event of death.
It Offers Tax Benefit
Section 80C of Indian Income Tax Act says the deposits in a PPF account can be qualified for a tax deduction. The account holder can claim for tax benefit for the amount invested on PPF. Moreover, the entire amount that he/she gets at the time of maturity is non-taxable. Here one can earn the interests without paying the tax. Also, wealth tax is also not applicable on PPF.
In Case You Need a Loan
Do you need a loan? Apply through your PPF account! You can apply for a loan on behalf of the PPF account, subject to certain norms. The loan can be applied 3rd year onwards till the 6th year. The bank will allow you to apply a loan maximum of 25% of the available balance at the end of the 2nd immediately preceding year. The rate of interest will be decided by the banks and the withdrawals need to be repaid within 2 years.
When You Extend the PPF Account
There is a provision on extending your PPF account after 15 years of contentious deposit. This can be extended for any tenure in a block of 5 years. You can earn interest as well, till the account is closed. If you extend the amount without any further contribution, the amount can be withdrawn without any limitation, up to one withdrawal in a year. In case you continue your PPF account after 15 years, with a continuous contribution, you are allowed to withdraw up to 60% of the balance at the starting of each extended period.
This popularity stems from the host of benefits it offers including a tax benefit, the safety of capital, flexibility in choosing the deposit amount, loan facility, extendable tenure etc. These all together make PPF account one of the most convenient and sought after investment option in India. So, what are you waiting for? Invest in PPF and save as much as possible.