PPF – A Long Term Saving Tool

PPF stands for Public Provident Fund. It is an government-sponsored saving instrument which helps to plan for retirement, children’s education, marriage etc. The Tenure for PPF is 15 Financial Years(16 Years excluding PPF Starting year). As-of-now it comes under “EEE”(Tax Exemption on invested amount, interest amount, maturity amount). Besides this, the saver can claim tax deduction of 1.5 Lakh under sec 80(c).

Minimum amount and Maximum amount

1.Minimum amount to be deposited in a financial year is 500 rupees and maximum is 1.5 Lakh per annum

2.If the depositor fails to deposit 500 rupees in a financial year, a penalty of 50rs has to be paid. Depositor has to pay penalty 50rs+500 minimum amount and then only he can invest in next financial year.

Where can it be opened?

  1. Previously PPF was available through Post-Offices only.

2.But now all major Government banks allow their customers to open PPF a/c on-line and off-line(Through Branches)

3.Private Banks like Axis Bank, HDFC, ICICI also offer PPF a/c’s online & off-line. You may check with your concerned branch for more details.

Who Can Open?

  • Any Resident Individual aged above 18 Years can open PPF a/c
  • A/c can be opened in the name of minor, but the parent has to be guardian until minor attains majority
  • After Minor attains majority, the a/c should be transferred in his/her name, until then the accumulated amount should be treated as “Parent’s income”
  • PPF a/c holder can extend the tenure any number of terms subject to block of 5 years
  • Depositor should give a consent to the bank or post office to the extend the tenure with or without contributions.
  • By giving consent, after 15 years the a/c fetches interest accrued with contribution or without contribution
  • Interest is compounded even without contribution, but the depositor has to give consent form to the bank or post office

Rate of Interest and Method of Interest calculation

PPF contributions are “Compounded” annually(Interest on interest) and credited to the PPF a/c at the end of the financial Year. The annual corpus is compounded and give it to the subscriber at the end of 15 Financial years.

Currently PPF interest rate is 7.1% and it may subject to change as the Indian government periodically reviews interest rates every Quarter(3 Months). In future, it may increase or decrease, depending on the the government stance.

so if you are a risk-averse investor and planning to save for your long term goals besides tax-planning PPF is an excellent option. Especially for those who are planning for retirement, child’s marriage, studies PPF is an apt choice. If you have a bank a/c which has PPF facility, consult them and enjoy the benefits.

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