Know These Things Before Investing in PPF

If you talk to anyone about their financial goals, you will realise how different they are from yours. Every individual has different financial conditions, which directly affect their financial goals, risk appetite, and time horizon. However, one thing stays common in all portfolios: a portion of the invested capital is in fixed-income instruments or schemes to offer steady income and offset the negative effect of high-risk-high-reward instruments such as stocks. Investments in fixed-income instruments allow earnings from regular interest rates, which stabilises the overall portfolio and can help build a retirement corpus. One of the most popular fixed-income investment instruments is the Public Provident Fund (PPF), which is backed by the Indian government, making it one of the safest investment schemes.

If you are looking to earn a steady income by investing in a Public Provident Fund (PPF), or if you are a salaried employee who contributes regularly to PPF, it is important to know some basic things about PPF. This blog will help you know some things to consider before investing in PPF.

• PPF is a long-term savings scheme backed by the Indian government that offers tax-free returns.
• The current interest rate for PPF is 7.1%.
• At every stage of the PPF account, the investment, interest earned, and maturity amount are all exempt from tax.

Public Provident Fund (PPF) is a scheme governed and backed by the Indian government that allows individuals to earn steady income over time. It is designed as a long-term retirement scheme and provides regular compound income on the PPF balance. Individuals can open a PPF account and make regular contributions to it to ensure they multiply the amount through the interest payouts. PPF has a maturity period of 15 years, which can be extended in blocks of 5 years after maturity. The minimum deposit amount is Rs. 500, and the maximum amount is Rs. 1.5 lakh per year. The interest rate is determined by the government and revised quarterly. The current rate (as of 2024) is around 7.1% per annum.

Opening a PPF account helps individuals earn regular income through interest payments, which are always timely. One of the most important benefits of opening a PPF account is the tax benefits it provides. You can claim the contribution amount as a tax deduction under section 80C of the Income Tax Act, up to Rs. 1.5 lakh.

Here are some features of a PPF account:

• Tenure: 15 years with the option to extend in 5-year blocks.
• Interest rate: Currently 7.1% but revised quarterly.
• Tax benefits: Tax deduction up to Rs. 1.5 lakh.
• Investment amount: Rs. 500 minimum and Rs. 1.5 lakh maximum per financial year.
• Loan facility: Available from the 3rd to 6th financial year.

You can open a PPF account both online and offline. To open a PPF account online, you can visit the PPF portal and fill out the PPF form. You can visit the nearest designated bank or post office to fill out a physical PPF opening form to open a PPF account offline.

PPF allows account holders to lower their total taxable income by claiming tax deductions. You can claim a tax deduction up to Rs. 1.5 lakh in a financial year on the amount you contribute to your PPF account.

You are eligible to make a full PPF withdrawal only after the completion of the 15-year lock-in period. However, partial withdrawal is only allowed after the 5th financial year of the PPF term. The maximum withdrawal is 50% of the balance succeeding the 4th year.

You can take a loan on your PPF balance from the 3rd financial year to the end of the 6th financial year. The maximum loan amount is 25% of the balance in the PPF account at the end of the second year preceding the year of the loan application.

You will need to fill out Form C, which you can get from the designated banks or post offices or online. Once filled out, submit the form with the relevant documents, and after successful verification, the PPF account will be credited to your bank account.

PPF is an ideal savings scheme that can allow you to build wealth over time and ensure financial security. Now that you know everything about PPF, you can consider investing in the scheme online or offline.

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