PPF: A combination of Tax Savings, Returns & Safety

"Price is what you pay. Value is what you get, said Warren Buffet.

The key to wealth creation is regular and systematic savings. For a person to begin his investment with risk-free returns and tax savings, PPF is one good option.

What is PPF?

PPF (Public Provident Fund) is a long-term investment vehicle that enables a person to accumulate funds for a later stage along with lowering yearly taxes. The investment needs to be made a minimum of once a year with a minimum investment of ₹500.

Some important features & benefits of PPF:

PPF is a long-term investment of 15 years that offers about a 7.1% interest rate, which is usually higher than the return on FDs provided by banks.

PPF falls in the EEE category. This means the investment, maturity, and interest amount are all tax-free. One can open a PPF account and deposits in this account can be claimed as a deduction u/s 80C up to ₹1,50,000 while filing an income tax return, thereby reducing the tax liability.

Some other features:

  • The lock-in period is 15 years, but it can be further extended to a maximum of 5 years
  • The deposits can be made in cash or cheque
  • PPF account can be opened for a minor as well
  • PPF account cannot be closed before 15 years
  • Loans can be taken on the PPF balance from the 3rd FY from the opening of the PPF account
  • Partial withdrawal can be made after the completion of 5 years from the date of opening the PPF account
  • A PPF account holder can appoint a nominee at any time
  • Opening a PPF account cannot be done in joint names

Who is eligible to open a PPF account?

  • Any Indian citizen can invest in PPF.
  • NRIs & HUFs cannot open a PPF account.

A few FAQs

  1. How can one open a PPF account?

Answer: This can be done online or offline (Post Office)

  1. Can the PPF account be closed before maturity?

Answer: PPF can be closed 5 years after the opening of the account that too under special circumstances.

  1. How many years a PPF account can be extended?

Answer: A PPF account can be extended any number of times (in the blocks of five years ) upon the account’s maturity after 15 years.

Read more about PPF: Features, Eligibility & More information - Learn by Quicko

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