If you are looking for a safe investment option that can save your tax and you can earn guaranteed returns, a PPF account is the best option for you. PPF account or public provident fund was introduced in 1968 by the Government of India, and it aimed to mobilize small savings as an investment with a guaranteed return on it. You can also call it saving-cum-tax saving investment option that enables you to build a retirement corpus.
PPF scheme of the Indian Government can provide you with a secured post-retirement life. The amount deposited per financial year ranges from INR 500 to INR1.5 lacs. Along with secured retirement, it offers you tax benefits on the amount invested in your PPF account.
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What is a PPF Account?
PPF scheme is a long-term investment vehicle that provides a high rate of interest and return. The return and the invested amount are non-taxable. For availing of this scheme, you need to open a PPF account, and the amount invested during the year will be claimed under section 80C deductions.
PPF Account Overview
| PPF information | |
| Interest Rate | 7.1% p.a. |
| Minimum Investment Amount | Rs.500 |
| Max. Investment amount | Rs. 1.5 lacs p.a. |
| Tenure | 15 years |
| Risk Profile | Risk-free returns |
| Tax benefits | Up to 1.5 lacs under section 80C |
Benefits of PPF Account
PPF account is highly beneficial for people looking for a long-term risk-free investment. Let’s have a look at PPF account benefits in Detail:
Tax Saving Benefits
PPF offers its investors an opportunity to avail of tax benefits in EEE format i.e Exempt, Exempt, Exempt. It means the amount invested in the PPF scheme up to Rs 1.5 lacs is tax exempted, and the interest earned and the maturity benefits are also tax-free under section 80C of the Income Tax Act.
Risk-Free Returns Guaranteed
As the scheme is backed by the Government of India, it is considered the safest investment option. The returns are guaranteed under this scheme and ensure financial security after retirement with minimal risk.
Small savings, High returns
There is no need for a big investment in the PPF scheme, You can invest from Rs.500 to Rs 1.5 lacs. Moreover, the PPF scheme offers a high rate of interest of 7.1% p.a. which is revised by the Indian Government every quarterly. You can multiply your amount to many folds with the PPF scheme in long term.
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Partial Withdrawal
The major benefit that a PPF account offer is that you can withdraw partial money in case of any financial challenges. After completing the 5 years of investment, you can make a partial withdrawal anytime. You can withdraw your partial amount in the following ways:
- 50% of the invested money until the 4th year of investment when you can request in the 5th year.
- 50% of the balance in the account until the preceding year when requested in the current year after 5 years and onwards.
Premature Closing
Although PPF is a long-term investment scheme, you can also opt for premature closing, if you are in dire need of money. However, this premature closing is available only after completing the first 5 years of investment. You can avail premature benefit under the following conditions:
- When the PPF account holder dependent suffers from any life-threatening disease. You are required to submit the relevant medical reports and evidence. You can use the PPF account balance for medical use.
- If you have to pay for the higher education of your children, all you have to do is, bring the admission confirmation letter and fees receipt of the college to avail the premature closing benefits of the PPF account.
- PPF account is not for NRI people, so if you are moving to other countries, you can avail of premature closing by showing your Visa, ITRs, etc.
Tax Saving Benefits
This is the main benefit of the PPF account as PPF investment offers tax benefits to the investors under section 80 C deductions. PPF investors enjoy EEE tax status which means the amount invested up to 1.5 lacs is exempted from tax, Interest earned and maturity amount is also tax exempted.
Flexibility of Tenure
After 15 years, when your PPF scheme gets mature, you can either withdraw the whole amount or extend the tenure in 5 years blocks.
Features of PPF investment
There are some important features of the PPF account that every investor must know before investing in the PPF Scheme. Let’s have a look:
Tenure: The minimum tenure for the PPF scheme is 15 years. However, you can extend it to the next 5 years, if you wish.
Investment amount: Minimum investment amount in the PPF scheme is Rs.500, while the maximum amount is Rs 1.5 lacs in a financial year.
Payment of inventment: You can pay in a Lump sum or installments. You have to pay once a year or monthly for 15 years or as long as you continue the scheme.
Modes of Payment: You can deposit the investment amount through cash, cheque, DD, or monry transfer.
No. of account holders: The PPF account can be opened only in the name of a single person. However, you can designate a nominee for your PPF account, but there can not be a joint account.
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Wrapping Up
PPF is one of the safest investment schemes which offers a transparent interest calculation. The government of India declares the Rate of Interest every 3 months, and the average Rate of interest is compounded every year. PPF offers higher ROI than other schemes like FDs, RDs, etc. it also offers loan or partial withdrawal options to the investors.
FAQs
Q1. How many times can one extend the PPF scheme tenure?
Ans. There is no upper limit for extending the tenure, it depends on you. You can extend it for the next 5 years after completing the lock-in period.
Q2. What happens if you fail to deposit money in your PPF account?
Ans. If you fail to deposit money in the PF account in a financial year, it gets deactivated. You can deposit a penalty of Rs. 50 for reactivating your account.
Q3. Which banks can open a PFF account?
All nationalized banks can open a PFF account.
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Hello there, my name is Phulutu, and I am the Head Content Developer at Nivesh Karlo. I have 13 years of experience working in fintech companies. I have worked at Policybazaar, Paytm Money, Investopedia, and others. I love writing about personal finance, investments, mutual funds, and stocks. All the articles I write are based on thorough research and analysis. However, it is highly recommended to note that neither Nivesh Karlo nor I recommend any investment without proper research and read all the documents carefully.
