Public Provident Fund, popularly known as PPF is a popular scheme among financial advisors and investors because of its flexible nature. The tax benefits PPF offers make it a highly lucrative plan for both small and big investors.
The Public Provident Fund plan was introduced in 1968 by the Ministry of Finance, Govt. of India. It is clearly stated in Section 80C of the Income Tax Act, 1961, that the interest earned during PPF tenure will be exempted from an individual’s tax liability. The PPF deposit of up to 1.5 lakhs is liable to the exemption and the amount received on maturity is tax-free. For such reasons, the PPF scheme is undoubtedly the most tax-efficient and preferred money-saving scheme.
What is a PPF Account?
PPF or Public Provident Fund is a popular saving as well as a tax-saving option that is supported by the Government of India. This scheme was introduced in 1968 by the National Savings Institute. This scheme aims to rationalize small investments by offering investors reasonable returns. The best part is that this scheme offers innumerable tax benefits and guarantees the association of the Central Government with it.
To start with the PPF scheme and avail of the benefits in return, one has to open a PPF account. It is possible to open an account online at a nationalized public sector bank in India, at the post office, or at a financial center like a private banks. You have to provide the relevant documents, and initial opening amount and submit relevant forms for the purpose.
Types of Interests Accrued on PPF Investments
The Government of India offers an interest rate on PPF accounts. The interest is estimated compounded and is more profitable for the investor. It is because each year the principal amount increases and interest is calculated on the same.
1. Monetary Deposit / Investment Amount
The main aim of the PPF scheme is to help India save money. Hence, the government allows people to open an account with a very low amount of money.
The person has to deposit a minimum sum of INR 500 in the scheme. The maximum limit of deposit in a year is INR 1, 50,000.
2. Time-Period
The PPF account of a person is valid for 15 years. The account is active for this duration. You can extend its validity if you want after the successful completion of the specific time frame. The extension is allowed for five more years.
3. Charges for Opening Account
The charge to open a PPF account is just INR 100. It is a one-time payment that the investor has to pay above the minimum amount of INR 500. The 500 rupees is the first deposit in the scheme.
4. Frequency of Deposit
The investor needs to submit a minimum amount of 500 in the PPF account each year to keep it active. The same frequency has to be maintained for 15 years.
An individual can deposit money a maximum of 12 times during a financial year. No more deposits can be made to the scheme after this.
How Can You Deposit Money to Your PPF Account?
There are multiple ways through which an individual can deposit money to his account, to the account of his child, spouse, and any other family member.
The payment options are Postal Order or PO, Cash, Cheque, and Online fund transfer.
Benefits of a PPF Scheme
- Tax Exemption
- Partial Withdrawals
- Compound Interest
- Invest as less than INR 500
- Multiple modes to deposit money
- Provision of Extension after maturity
- Trustworthy and secure option
- Excellent investment scheme for long-term investments
- Easy to access as the account opening facility is available at numerous venues, nationwide
- The policy amount is non-taxable
- Scheme available at numerous banks
- Useful for planning education, retirement, marriage purposes, and others
Eligibility Criteria for Opening PPF Account
- Indian residents above 18 years of age can open a PPF account for themselves, or other members of their family.
- There is no upper age limit for opening a PPF account.
- PPF accounts offline or online can be opened for a kid or minor below 18 years of age. In this case, the total investment in the account cannot exceed 1.5 lakhs for a given financial year.
- Grandparents are not allowed to open a PPF account offline or online for their grandchildren.
- It is possible to open an account online in a bank that offers this service.
Significance of Various Forms Associated with the PPF Scheme
There are various forms associated with the PPF scheme as follows:
- Form A – It is to open the Public Provident Fund Account
- Form B – It is to make deposits in the account or to repay the loan taken
- Form C – It is to obtain partial withdrawals
- Form D – It is to request a loan against the PPF account
- Form E – It is to make a nominee
- Form F – It is to make changes in the information related to the PPF account
- Form G – It is to claim the funds on an account by a nominee or a legal heir
- Form H – It is to extend the PPF account duration once its maturity has arrived
The PPF scheme is one of the simplest and profitable ways to save money as well as get the benefit of tax deductions.
