public Provident Fund Or PPF is one of the most popular, long-term investment options in India. It is a retirement savings policy provided by the Government of India to create long-term wealth for the investors after retirement. Introduced by the National Savings Institute of the Ministry of Finance in 1968, PPF It has become a powerful tool for Indians in which they can get tax benefits. The scheme has emerged as one of the most sought-after investment options owing to its safety, returns and tax benefits.
This government-backed scheme is a variant of a small savings policy and it ensures to provide assured returns at the time of maturity, which makes it so loved among investors.
Public Provident Fund is flexible in nature in terms of investment as individuals can invest as little as Rs 500 per year in their accounts, and can also invest up to Rs 1,50,000 per year. This is also one of the reasons why Indians are so eager to invest in this fund.
What are the benefits of Personal Provident Fund?
Apart from being flexible in nature, PPF also comes with other benefits. Firstly, it is 100 percent risk free investment as this fund is backed by the Government of India, and it does not move in line with the stock exchange rates which keep on changing from day to day. It also acts as a mode for an account holder to take a loan in case of emergency at a nominal rate of interest of 1 per cent per annum only. However, this facility is available only from the third to the sixth year of opening the PPF account. After six years, the account holder can partially withdraw money from PPF.
Even though the initial tenure of PPF is 15 years, the investor can extend the tenure of his PPF account for as many years as needed. This can be done in blocks of five years by submitting the PPF account extension form.
Also, since it is a long-term investment scheme, PPF investors are eligible for interest on interest, which leads to higher returns.
What are the tax benefits of PPF?
Public Provident Fund is one of the few investment options that enjoy the benefits of the government’s triple tax exemption, also known as exempt-exempt-exempt (EEE) status. This means that the PPF account holder is eligible for tax exemption thrice, i.e. at the time of investment, accumulation and withdrawal. This means that it offers a deduction of up to Rs 1.5 lakh per year on the investment made. Under Section 80C of the Income Tax Act, 1961, the rate of interest earned every year is also free from any levy and one can withdraw the maturity amount without tax.
The interest rate of PPF, which is currently fixed at 7.1 per cent, is the highest among fixed income products, which are backed by the government.
how to open ppf account online
PPF accounts can be opened online or one can also visit their banks to open the account. To open a PPF account online, one has to first login to the net banking portal of your banks. There, he should find an option where he allows to open PPF account. After this, one has to fill all the details including bank and nominee, and verify them to proceed further. Once this is done, the account holder has to enter the amount he wants to invest in the fund. Depending on the bank, either an OTP will be sent or a transaction password will be asked from the individual to complete the creation of the PPF account.
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