We all know that Public Provident Fund(PPF)is a long-term investment tool. The amount invested in PPF comes under “EEE” (Exemption on investment amount under section 80(c)-Exemption on interest accrued-Exemption on maturity amount).
Generally savers ignore PPF as they can’t hold the investments for such a long period of 15 years. But they don’t know that they can withdraw the investment interim and even can take loan in between the lock-in period.
PPF is an excellent tool to save taxes and avail exemption on the interest and maturity proceeds. Though investors invest in PPF with long-term view, there might be emergencies to have liquid cash in hand at some times. At that times, the investor can withdraw his contribution amount subject to-
- The investor can withdraw 50% of the balance prevailing at the end of 4th financial year
- But he is eligible to withdraw the corpus only after completion of 5 Financial Years(Only corpus at the end of 4th financial year can be withdrawn after completion of 5 financial years)
Conditions to avail loan under PPF a/c– Inspite of withdrawing amount, the subscriber can opt for loan subject to-
- Loan can be availed in between 3rd and 6th financial year from the year of account opening
- The eligible amount he can availed is up to 25% of the balance at the end of 2nd year
- The interest rate charged would be 1% more than the PPF interest rate. This interest rate would be fixed at the time of taking the loan inspite the PPF interest rates changes thereafter!
- The loan has to be repaid within 3 Years(36 Months)of taking a loan. If it is not paid with in that period, 6% additional interest above the PPF interest would be levied
- 2nd loan would not be given unless the first loan is repaid.
So from the above, we can conclude that PPF is not only a great investment vehicle, but also a great emergency tool. Don’t think that we have to continuously invests for 15 full financial years instead we can withdrawn the corpus and even take a loan in the interim subject to the above terms and conditions.
So Consider PPF as an all-in-one investment tool. If you utilise PPF properly, you would remain a huge corpus to you and your family!