What is Public Provident Fund (PPF)?
The Public Provident Fund (PPF) is a long-term savings scheme offered by the government of India. It is a savings and investment vehicle that allows individuals to set aside a portion of their income for the future, while also earning a decent rate of interest on their savings. The PPF is a tax-saving investment option, as the contributions made to the fund are eligible for tax deductions under section 80C of the Income Tax Act.
Eligibility for PPF
Any resident Indian individual can open a PPF account, including minors who can open the account through a guardian. Non-resident Indians (NRIs) are not eligible to open a PPF account.
How to Open a PPF Account
The PPF account can be opened at most banks and post offices in India. To open a PPF account, the individual must fill out an application form and provide proof of identity, proof of address, and proof of age. The minimum amount required to open a PPF account is INR 500 (Indian Rupees), and the maximum amount that can be contributed in a year is INR 1.5 lakhs.
Contribution to PPF
Individuals can make contributions to the PPF account on a yearly or monthly basis. The minimum contribution required is INR 500 per year, and the maximum contribution allowed is INR 1.5 lakhs per year. Contributions can be made through cash, cheque, or demand draft.
Interest Rate on PPF
The interest rate on the PPF is determined by the government and is reviewed periodically. The current interest rate on the PPF is 7.1% per annum, compounded annually.
Lock-in Period for PPF
The PPF account has a lock-in period of 15 years, after which the account can be extended in blocks of 5 years. During the lock-in period, the individual cannot make any withdrawals from the PPF account.
Withdrawals from PPF
After the completion of the lock-in period, the individual can make partial withdrawals from the PPF account. The individual can make one withdrawal per financial year, starting from the seventh financial year after opening the account. The maximum amount that can be withdrawn is limited to 50% of the balance at the end of the fourth year preceding the year of withdrawal or the end of the preceding year, whichever is lower.
Tax Benefits of PPF
The PPF is a tax-saving investment option, as the contributions made to the fund are eligible for tax deductions under section 80C of the Income Tax Act. The interest earned on the PPF is tax-free, and the maturity proceeds are also tax-free.
PPF as a Retirement Planning Tool
In addition to being a savings and investment option, the PPF is also a retirement planning tool. It allows individuals to set aside funds for their retirement years, and the interest earned on the savings is tax-free.
The Public Provident Fund (PPF) is a long-term savings scheme offered by the government of India. It is a safe and secure investment option with moderate returns, and is a popular choice among individuals looking to save and invest for the future. The PPF offers tax benefits, and is a useful tool for retirement planning. It is an investment option worth considering for anyone looking to set aside a portion of their income for the future.