Public Provident Fund (PPF)

Public Provident Fund is a favourite of many small investors for tax savings who want nothing to do with equities. Investment up to Rs 1,00,000 can be deducted for tax under section 80C and to top it interest earned on PPF is completely tax-free. The rate of interest earned presently is a decent 8.7% p.a. compounded annually.

Opening PPF account

You can open a PPF account for yourself or for a minor child. However deposits in all accounts should not exceed Rs 1 lakh a year. NRIs cannot invest in PPF but you will be allowed to continue investing if you become an NRI after opening the account. You can open an account by filling the form from any post office or a public sector bank. Some banks like SBI or ICICI Bank have tied up with India Post to offer online PPF account.

Nomination in PPF

Nomination facility is available in PPF and the account can be transferred from one post office to another. Joint account is not permitted in PPF.

PPF maturity

A maximum of 12 deposits can be made in a financial year subject to the maximum amount. To keep the account active you have to deposit a minimum of Rs 500 every year. The account matures in 15 years but can be continued for 5 years at a time, with or without further contributions. Like in a bank you get a Pass Book for entering details of transactions.

Expired PPF account

If you fail to deposit the minimum amount in any year the account would expire. Such an expired account can be revived by depositing the minimum amount for each year and default fee of Rs 50.

Loan and withdrawals on PPF

Partial withdrawals are permitted from year 7. However, loan is available on your PPF deposit from the 3rd year till the 5th year at an interest rate of 2%.

Recommendation

The problem with Public Provident Fund is its lack of liquidity. If you are willing to live with poor liquidity, you should invest as much as you can in this scheme before looking for other fixed income investment options.

Min & Max Investment

Min- Rs 500, Max- Rs 1,00,000 in a financial year

Rate of Interest

8.7% p.a.

Maturity/ Tenure

15 years

Tax Benefit

Deposit & interest qualify for rebate under sec 80 C of IT Act


Get the all financial products under one roof only at

you will NEVER GO WRONG with us!

Unbiased . Best Deals . Appropriate Products . No Mis-selling