Public Provident Fund(PPF)
The Public Provident Fund (PPF) is a long-term savings and investment scheme introduced by the Indian government. It is one of the most popular and tax-efficient savings options available to Indian residents.
Overview of the Public Provident Fund:
1. Purpose:
PPF is design to encourage small savings and long-term wealth accumulation among Indian citizens.
2. Eligibility:
Any Indian resident, including minors, can open a PPF account. Individuals classified as Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) do not meet the eligibility criteria for initiating PPF account openings.
3. Duration:
PPF has a maturity period of 15 years. However, account holders possess the flexibility to extend it in blocks of 5 years indefinitely.
4. Investment Limit:
Investors can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh in a financial year. Deposits can be made in a lump sum or in a maximum of 12 installments per year.
5. Interest Rate:
The interest rate on PPF is set by the government and is typically higher than regular savings accounts. The rate is subject to periodic revisions. Interest is compounded annually.
6. Tax Benefits:
Contributions to PPF are eligible for tax deductions under Section 80C of the Income Tax Act, up to a limit of ₹1.5 lakh per financial year. The interest earned and the maturity amount remain exempt from taxation.
7. Loan Facility:
Account holders can avail of a loan against the PPF balance from the third to the sixth financial year. The loan can be up to 25% of the account balance at the end of the second preceding year.
8. Partial Withdrawal:
Partial withdrawals are allow from the seventh year onwards, subject to certain conditions. The amount that can be withdrawn is capped at a specific percentage of the account balance.
9. Nomination:
Account holders can nominate a family member to receive the PPF proceeds in the event of their demise.
10. Extension of Account:
After maturity, account holders can extend the PPF account in blocks of 5 years without making additional contributions.
11. Transferability:
PPF accounts can be transferred from one authorized bank or post office to another without any charges.
12. Withdrawal on Maturity:
On maturity, the entire PPF amount can be withdrawn without any tax implications. Account holders can also choose to extend the account without making any further contributions.
13. Interest Calculation:
Interest on the PPF balance is calculated on the lowest balance between the 5th and the last day of the month and is credited on March 31 each year.
14. Risk-Free Investment:
PPF is backed by the government, making it a safe and risk-free investment option.
15. Changes in Interest Rate:
1. The government reviews and announces the interest rates on PPF periodically. Changes, if any, are applicable from the beginning of the financial year.
2. Investors looking for a combination of tax benefits, long-term savings, and safety often find the Public Provident Fund to be an attractive investment option.
3. It offers a disciplined way to save for the future while providing tax advantages and reasonable returns.
For more information visit: https://www.nsiindia.gov.in/
FAQs on Public Provident Fund :
1: What is the Public Provident Fund (PPF)?
Ans: The Public Provident Fund (PPF) is a long-term savings and investment scheme in India, back by the government. It was introduce to encourage small savings among Indian citizens.
2: Who can open a PPF account?
Ans: Any Indian resident, including minors, can open a PPF account. Non-resident Indians (NRIs) are not eligible to open a new PPF account, but existing accounts can be continued until maturity.
3: Where can I open a PPF account?
Ans: PPF accounts can be open at designated nationalized banks, authorized post offices, and certain private banks.
4: What is the tenure of a PPF account?
Ans: The PPF account has a maturity period of 15 years. However, the account can be extended in blocks of 5 years indefinitely.
5: What is the minimum and maximum deposit allow in a PPF account?
Ans: The minimum deposit require to open a PPF account is Rs. 500 per year, and the maximum deposit allowed is Rs. 1.5 lakh per financial year.
6: Can I deposit money in my PPF account in a lump sum or only in installments?
Ans: Both lump-sum and installment deposits are allow, as long as the total does not exceed the annual limit of Rs. 1.5 lakh.
7: What is the interest rate on PPF?
Ans: The interest rate on PPF is set by the government and is subject to change.
8: Is the interest earn on PPF tax-free?
Ans: Yes, the interest earn on PPF is tax-free. Additionally, the contributions made to PPF are eligible for tax deductions under Section 80C of the Income Tax Act.
9: Can I take a loan against my PPF account?
Ans: Yes, account holders can avail of loans against their PPF deposits from the third financial year up to the sixth financial year of opening the account.
10: Is premature withdrawal allow from a PPF account?
Ans: Partial withdrawals are allow from the seventh year of opening the account, subject to certain conditions. Full withdrawal is permit only after the completion of 15 years.
11: Can I extend my PPF account after the initial 15-year period?
Ans: Yes, the PPF account can be extend in blocks of 5 years after the initial 15-year maturity period, and there is no limit on the number of extensions.
12: What happens to the PPF account if the account holder passes away?
Ans: In the case of the account holder’s demise, the balance in the PPF account is pay to the nominee or legal heirs. The account cannot be continue in the name of the nominee.
13: Can I transfer my PPF account from one bank/post office to another?
Ans: Yes, PPF accounts can be transfer from one authoriz bank or post office to another. The account holder needs to submit a transfer request along with the prescribed documents.
14: Can a minor have a PPF account?
Ans: Yes, a PPF account can be open in the name of a minor with a parent or guardian as the guardian for the account.
15: Can I open more than one PPF account?
Ans: No, an individual is allowe to open only one PPF account in their name. However, a parent can open a PPF account for each minor child but can have only one account per child.
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