Public Provident Fund (PPF) is a popular long-term savings scheme offered by the Indian government. It is a safe and reliable investment option that provides attractive returns and tax benefits. In this article, we will explain how to create a PPF account, how it works, and benefits of PPF account
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How to create a PPF account?
To open a PPF account, you need to visit your nearest post office or a designated bank branch. You will need to fill in the PPF account opening form, submit your identity and address proof, and provide a photograph. You can also open a PPF account online through the net banking facility provided by your bank.
The minimum deposit amount for a PPF account is Rs. 500, and the maximum amount is Rs. 1.5 lakhs per financial year. You can make deposits in one lump sum or in installments throughout the year. The PPF account has a maturity period of 15 years, and you can extend it in blocks of 5 years after maturity.
How does a PPF account work?
PPF is a long-term savings scheme that offers attractive returns with the added benefit of tax exemption. The interest rate on PPF is fixed by the government every quarter, and it is currently 7.1% per annum. The interest is compounded annually, which means the interest earned in the previous year is added to the principal amount, and interest is calculated on the total amount.
You can withdraw your PPF investment only after the completion of the 15-year maturity period. However, you can partially withdraw your investment from the 7th year onwards. The withdrawal limit is limited to 50% of the balance in the previous year, and only one partial withdrawal is allowed per year.
PPF also offers tax benefits under Section 80C of the Income Tax Act. The investments made in PPF are eligible for tax deductions up to Rs. 1.5 lakhs per year. The interest earned on PPF is also tax-free. Therefore, investing in PPF helps you save tax while earning a decent return on your investment.
Benefits of PPF account:
Attractive returns: PPF offers an attractive interest rate that is higher than most other savings schemes.
Tax benefits: PPF investments are eligible for tax deductions up to Rs. 1.5 lakhs per year, and the interest earned is tax-free.
Safe and secure: PPF is a safe and secure investment option as it is backed by the government.
Long-term savings: PPF has a maturity period of 15 years, which encourages long-term savings.
Partial withdrawals: You can make partial withdrawals from the PPF account after the completion of 7 years.
PPF is a safe and reliable long-term savings scheme that offers attractive returns and tax benefits. It is easy to create a PPF account, and it can be done at any post office or bank branch. By investing in PPF, you can secure your financial future while also saving tax.