It was in 1968 when the Public Provident Fund (PPF) was first introduced by the National Savings Institute of the Ministry of Finance. This is a scheme that enables you to save both, your finance and taxes. The main purpose of PPF is to mobilize small-scale savings accounts with the lure of an investment opportunity, which will provide good returns as well as tax exemption.
PPF happens to be a long-term investment scheme. The minimum and maximum investment amounts are Rs 500 and Rs 1,50, 000, respectively, in one financial year. Loan facilities are available and premature withdrawal and extension of the account are allowed. PPF scheme is fully supported by the Indian Government.
Fintra presents vital information for enhancing your knowledge about Public Provident Funds. This blog will surely be helpful and informative enough for obtaining your PPF account.
Topics covered are as follows:
Public Provident Fund is an ideal scheme for those who have a low-risk appetite. Due to being mandated by the Indian Government, it is backed up with guaranteed returns that will protect the financial needs of the masses in the nation. Moreover, the invested funds in a PPF account aren't market-linked. An investor can even opt for the public provident fund regime to diversify its financial and investment portfolio. In fact, in critical times when there's a downswing of the business cycle, the PPF accounts can benefit by preserving your capital.
Experts advise that the best time to invest in Public Provident Fund (PPF) is between the 1st to 5th of any month, preferably in April every year. This is so because the interest is calculated for the calendar month on the lowest balance in the PPF Account between the end of the 5th day and the end of the month. To gain more information about the same, please click here.
PPF accounts can be opened both offline and online. To open a PPF account offline, you have to approach either a post office or a bank. Do bear in mind the PPF facility is not available in every bank but only a designated few such as State Bank of India, ICICI Bank, Punjab National Bank, etc.
To open a PPF account at a designated branch, you need to submit documents such as ID proof, address proof, recent passport size photographs, and your pay-in-slip. Now you have to complete the following steps:
To open a PPF Account via the internet, you have to go through the following steps:
To know what documents are required for opening a PPF account please click here.
To know the list of all the forms in a PPF account please click here.
Indian residents living in the nation are qualified to open a PPF account in his/her name. Minors are additionally permitted to have a Public provident fund account in their name if it is worked by their parents.
Non-residential Indians are not allowed to open another PPF account. Any current record in their name stays dynamic till the finish of residency. These records can't be reached out for a very long time – an advantage accessible to Indian occupants.
Learn more about the eligibility criteria on this link.
Personal tax exclusions are relevant to the chief sum of resources into a PPF as recorded. The whole estimation of venture can be guaranteed for tax waiver under segment 80C of the Income Tax Act of 1961. The absolute premium gathered on PPF speculation is additionally excluded from any tax counts. Whereas, the whole sum reclaimed from a PPF account supply of development isn't dependent upon taxation. This approach makes the public provident fund plot appealing to numerous speculators in India. Get more info about the PPF Taxation by clicking here.
To know more on which banks offer PPF accounts please click here.
By investing in a Public Provident Fund Scheme, you will be able to enjoy the following benefits:
Like everything else, the Public Provident Fund Scheme has its drawbacks. The disadvantages of PPF are as follows:
It's the Finance Ministry that sets the interest rate every year that is paid on 31st March. The PPF interest is calculated on the lowest balance that is observed in the PPF account from the fifth day to the last day of each month. Therefore, it is vital to make your PPF contribution before the 5th of every month.
The current rate of interest of a PPF account is 7.10% per annum and it’s compounded annually. Learn more about PPF by clicking here.
Use Fintra's online PPF Calculator to determine the returns one can expect by investing a certain amount in the PPF account.
PPFs have a lock-in period of 15 years. Previously, no premature closure was allowed except in the case of the death of the investor. However, nowadays the rules have become lax. Premature closure is now granted in case of a serious disease of the investor, spouse or dependent children. In the case of higher education of a minor account holder, premature closure will be permitted but only if the legitimate documents are produced.
Premature withdrawal is allowed only after five years of completion of the account. Withdrawal can be as much as 50% of the account balance.
As we have mentioned above, PPF is known to be a tax-free saving scheme that is regulated by the Indian Government. PPF was invented with the main objective to design a small investment saving scheme that's coupled with a return on it. PPF can also be called a savings-cum-tax savings investment tool that enables an individual to create a retirement corpus while saving on annual taxes. If you're seeking a safe investment option to save taxes and earn guaranteed returns then you must opt for a PPF account.