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A Public Provident Fund (PPF) is a long-term savings scheme backed by the Indian government. It encourages small savings by offering stable returns and tax benefits. It is a popular choice for those seeking a safe, risk-free investment over time.
What is the Public Provident Fund?
PPF is a 15-year fixed-term savings plan introduced by the government, offering guaranteed returns that are not linked to market fluctuations.
You deposit money in your account annually, either in a lump sum or in up to 12 instalments. The public provident fund is highly suited for conservative investors with long‑term goals.
Public Provident Fund: Key Features
– Long-Term Saving: PPF comes with a lock-in period of 15 years, which helps build long-term savings.
– Fixed Interest: The government sets the interest rate, which is currently around 7.1 per cent per year (as of July 2024).
– Tax Benefits: Money invested in PPF gives you tax savings under Section 80C, and the interest you earn is also tax-free.
– Loan Option: You can take a loan against your PPF balance between the 3rd and 6th year.
– Partial Withdrawal: After 6 years, you are allowed to withdraw part of your money if needed.
– Extension Option: Once the 15 years are over, you can keep the account going in 5-year blocks.
Public Provident Fund: Interest Rate
The government sets the PPF interest rate every three months. It is generally higher than what you get from regular savings accounts or fixed deposits, but lower than returns from tax-saving mutual funds like ELSS.
Right now, the rate is 7.1 per cent per year, and it is compounded annually. This helps your money grow slowly but steadily, giving you a good amount by the time the account matures.
Public Provident Fund: Tax Applicability
Investing in a PPF account comes with great tax benefits, which is why many people prefer it.
– Tax Savings: You can get a tax deduction of up to Rs 1.5 lakh per year under Section 80C when you invest in PPF.
– No Tax on Interest: The interest you earn on your PPF savings is completely tax-free, so your returns are better.
– Tax-Free Maturity: When your PPF account matures after 15 years, the entire amount you receive is also tax-free.
How to Open a PPF Account
Opening a PPF account is easy and can be done at any authorised bank or post office. Here’s how:
– Choose a Bank or Post Office: Pick where you want to open your PPF account. Most major banks and post offices offer this service.
– Get the Form: Ask for the PPF account opening form or fill it out online if the bank allows.
– Submit Documents: Provide proof of identity, address, and a passport-sized photo.
– Deposit Money: Make an initial deposit of at least Rs 500. You can invest up to Rs 1.5 lakh in a financial year.
– Get Your Passbook: After your account is opened, you will get a passbook with your account details.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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