Monday, February 13, 2017

Benefits of PPF (Public Provident Fund) Account

This post is going to explain the benefits of having a PPF account.

 Many people thinks that PPF account is applicable only for salaried people, but in fact anybody can open a PPF account in India. If you still don't have PPF account read this post to get an idea about the benefits of having a PPF account.

According to Public Provident Fun Act 1968, PPF account can be opened by general public of India. PPF is an ideal investment option for both salaried as well as self employed classes. Non-Resident Indians (NRIs) are not eligible for PPF account. Also an individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons.

How much amount I have to invest in PPF Account?
In Public Provident Fund account you can invest money up to Rs.1,50,000 in a financial year (Financial year starts on 1st April and ends on 31st March). Remember 1.5 lakh is just the maximum amount allowed for investment in PPF. If you are not capable of investing such huge amount then a minimum of Rs.500/- is also allowed. I mean you can invest any amount ranging from Rs.500/- to Rs.1,50,000/-. PPF account is of duration 15 years.

The investment can also be done in installments (max 12 times in a year).

What is the Rate of Interest I am going to get in PPF Account?
or the presennt financial year 2016-17 the PPF interest rate is 8.1%. Previous financial years enjoyed even better interest rate. Interest rate depends on inflation and changes every financial year.

Tax Benefits of having PPF Account
Investment up to INR.1,50,000 per annum qualifies for IT Rebate under section 80C of IT Act. That means if income tax is payable on your income then you can claim Rs.1 Lakh under saving in PPF so that tax cannot be applicable up to 1.5 lakh income.

Interest earned and the maturity amount you are going to receive are fully tax exempted. PPF investment, interest and maturity amount is totally tax free. What else do you want? :)

Loan facility available from 3rd financial year upto 5th financial year. Withdrawal permitted from 6th financial year.

PPF account can be opened at any head post office or any SBI branch in India. When you open an account, you will be given a passbook in which all subscriptions, interest accrued, withdrawals and loans are recorded.

Even though some times fixed deposit provide better interest rate as compared to PPF (some times even low rate) remember the interest from fixed deposit is fully taxable where as PPF interest is tax free. If the interest from fixed deposit exceed Rs.10000/- in a year then you have to submit Form 15G or 15H so that TDS cannot be deducted on your earned interest. There is no concept like this on PPF account.

Also I recommend you to have PPF account via SBI bank branch because here you can even deposit money in your PPF account via online by linking your Internet Banking account. No need to visit your branch for depositing money in PPF. Cool way for banking :).

PPF is also popularly known as EEE (Exempt Exempt Exempt) investment. Because the principal is exempt under tax. Also the interest earned yearly is not taxable. Finally maturity is also not taxable. A very happy news for all.

I think investing in PPF account is a safe bet for employess as well as for students also.  Share your views on PPF account by leaving here a comment.

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