These points about the essentials of PPF would help you gain more insights into this popular tax savings scheme.
PPF or the Public Provident Fund is one of the most popular and favored schemes of tax savings in India. Let us help you find out a little more about PPF and generate an understanding that is comprehensive in nature.
1. Where to Open the Account?
Your PPF account can be opened in any specific bank branch or a post office. The minimum investment for opening the account is Rs. 500 and the documents related to regular KYC have to be submitted during the account opening process.
2. PPF Interest Rate?
The interest rate for PPF is 8.8% per annum. The rate is subjected to change during each financial year which is done as per the average yield on bonds during the last year. The interest rate will be fixed at 0.25% over the yield on 10 year bond of the government.
3. PPF Interest Rate Calculator?
The interest is calculated on an annually compounding basis upon the balance amount in the account of your PPF. Nonetheless, the calculation of interest will be done during each and every month. If your PPF contribution gets credited on or before the 5th of any month, then interest will be paid for that month too. But if the contribution gets credited after 5th of the month, then you will be assigned with the interest from the subsequent month onwards.
4. PPF Tax Benefits?
The contribution that you make towards your PPF account holds eligibility for tax deduction under the Section 80C of the Income Tax Act. Additionally, the interest that you earn from PPF is also tax free.
5. Minimum and Maximum Level of Investment?
The minimum amount required for investment each year is Rs. 500 and the maximum amount of investment that is allowed every year is Rs. 1 Lakh. The contribution in your PPF account can be made via a maximum of 12 installments every year. In case you fail to make the minimum investment, you will be charged a penalty of Rs. 50 per year.
6. PPF Maturity?
The maturity period of a PPF account is 15 years. The period can be extended for one or more slabs of 5 years afterwards.
7. What About Premature Withdrawing?
Withdrawal is entertained by PPF account but only after the 6th year. You can, however, withdraw 50% of your balance amount only at the end of the 4th year or at the year that is immediately preceded, whichever is lower. Withdrawal is allowed only once per year.
8. Loan from PPF Account?
You can avail this facility but only after the 3rd year. The loan is allowed up to an extent of 25% of the balance amount last year.
9. PPF Account by an NRI?
Well, an NRI cannot open up a PPF account. But then, what happens if you have opened the account as a resident and then you became an NRI? In this case, you will be allowed to continue with the account contribution until the maturity date arrives; but in the capacity of a non-repatriable PPF account.
10. In case of PPF Holder’s Death?
In case of the death of the holder, the balance amount in the PPF account will be disbursed before the completion of maturity. The disbursement will be made to the nominee or any legal heir of the person who has encountered death. However, fresh contribution for continuing the PPF account is not at all allowed to the nominee or the legal heir.
Not to be mentioned, PPF is an amazing option for tax savings. Whether it should be a part of your investment or not is totally dependent on your entire planning on tax savings. So, go ahead with the tax planning this year and without any doubt, include PPF in it.