Public Provident Fund is one the best Tax Savings Scheme. PPF is a long-term, government-backed small savings scheme of the Central government started with the objective of providing old age income security to the workers in the unorganised sector and self-employed individuals.
Suitable for
It is especially suitable for self-employed professionals and small businessmen who are not covered by the Employees' Provident Fund. Those who don't have access to an organised setup can realise long-term goals through the PPF.
Annual limit
There is an annual limit of Rs 70,000 that one can invest in the PPF.
Returns:
The 8% compounding interest you earn on the balance can work wonders for you, especially because a PPF account is a long-term investment.This is tax-free money. In the 30% tax bracket, this is equivalent to receiving almost 11.5% interest on a bank fixed deposit. The PPF offers the highest post-tax returns among all fixed income options since no tax is levied on the investment, income and withdrawals.
What is the minimum and maximum amount of deposit?
The minimum deposit that you can make into a PPF account in a year is Rs 500. The maximum is Rs 70,000.
The excellent point:
If you contribute Rs 70,000 a year to your PPF for 15 years, your investment would grow to Rs 22.92 lakh on maturity.
What are the tax benefits from PPF?
The amount you invest is eligible for deduction under the Rs 100,000 limit of Section 80C. On maturity, the entire amount including the interest is non-taxable.
What is the interest rate offered through PPF?
Currently, the interest rate offered through PPF is around 8 per cent, which is compounded annually. Interest is calculated on the lowest balance between the fifth day and last day of the calendar month and is credited to the account on March 31 every year. So to derive the maximum, the deposits should be made between 1st and 5th day of the month.
Best way to get started:
Open PPF in your bank as ask to link it with your savings account. Then you can transfer/view details of you PPF account online too.
How to open PPF account:
1. Make a trip to your local post office. You can open it at any head post office or selection grade sub post offices.
2. Visit the nationalised bank in your neighborhood. Selected branches of nationalised banks can also open accounts.
3. Drop by a State Bank of India branch
Most important point related to PPF account
You can have only one PPF account in your name. If at any point it is detected that you have two accounts, the second account you have opened will be closed, and you will be refunded only the principal amount, not the interest.
You cannot open a joint account with another individual. The account can only be opened in one person's name.
Procure and submit account opening form and Identity/address Proofs
It would only 3 minutes to fill. Choose a nominee and get a witness signature. Now you have to submit anyone of following Proofs.
Passport
Pan card
Driving license
Voter id
Ration card
Two Passport Size Photographs
Any government issued identity or address proof should work. Keep originals of proof in hand for verification if needed. That's it. The bank should now be able to open the account. Usually it may take about 20 minutes or so.
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