Public Provident Fund (PPF)-The
most recommended tax saving investment
is a very good choice as tax saving option as welll as investment
option. Investment in PPF brings you tax free returns of 8.7% per year
plus investments in PPF are eligible for deduction u/s 80C.
cons, positives & negatives about investing in Public Provident
Fund (PPF) in detail:
- One can open a PPF account with a nationalised bank
or post office with a very small yearly contribution of Rs.
- PPF account can also be opened in the name of a minor
by his/her parents/guardians.
- NRI are not eligible to open a PPF account.
banks have facility to link your PPF with your savings bank account,
which allows you to deposit money in your PPF through online transfer.
- From financial year 2014-15 Rs. 150000/- is the
maximum amount which can be deposited to PPF in a year.
investments are flexible. You can deposit to your PPF once in a month
and total 12 times in a year subject to the total investment of Rs.
- It is suggested to invest in your PPF account from
to 5th of the month to earn interest for that month too. This
small planning will maximize your benefits.
- PPF is a long term savings plan having a maturity
period of 15 years which can further be extended in blocks of 5 years.
- On maturity of PPF ie. after 15 years of opening PPF
account, full amount can be withdrawn and all is tax free.
compulsory yearly contribution is of Rs. 500, failing
account will be deactivated and a penalty of Rs. 50 per year is imposed
to activate the account.
amount can be withdrawn within the first 6 years. After 6 years
only part of the amount as per the PPF rules can be withdrawn.
loan can be taken upto 25% of balance in PPF account
in preceeding year. Loan will be chargeable to interest @ 2% more than
the PPF deposit interest rate for short term loans(36 months). Interest
rate on long term loan is @ 6% more than the
PPF deposit interest rate.
case of death of the account holder, nominee or the legal heir
entitled to receive the balance in PPF account of the deceased even
before 5 years.
- The nominee or legal heirs can not continue the PPF
account of the deceased.
is suggested as the best tax saving option as this provides you
risk free and tax free returns of approx 12% (considering the tax free
part of 8.7% return). From financial Year 2016-17 the interest rate on
small savings schemes is being reduced by government so there will be a
reduction in the interest from 8.7% to 8.1%.
PPF investment is a smart choice for the people
donot want to take risks in their investments and to self employed
people as they need to plan for their retirements.
- Tax free return, ie. interest earned on PPF is tax
- Now with many banks online transaction in PPF are
- Minimum amount of investment is just Rs. 500
- From the financial year 2014-15 total Rs. 150000 can
be invested in each year
- As PPF is government organised fund, its safe to
invest in PPF
- PPF accounts can not be attached
by Court Orders
- Loan can be taken from PPF deposits
- Withdrawls to some extent are possible
- High lock in period of 15 years
- Interest rates can vary as interest rates are driven
by market changes
- NRIs & HUFs can not open PPF accounts
- Withdrawls are allowed only after 6 years and to a
limited percentage of total deposit
Other useful links:
Linked Savings Schemes(ELSS)
Deposits(FDs) with Tax benefits
Some Tax Planning Tips