What is Public Provident Fund scheme?
The Public Provident Fund (PPF) scheme is a popular investment option offered by the Government of India. It is a long-term savings and investment scheme that provides individuals with a safe and secure investment opportunity to build a retirement corpus or to meet long-term financial goals. In this article, we will delve deeper into what the PPF scheme is and how it works.
What is the Public Provident Fund (PPF) scheme?
The Public Provident Fund (PPF) scheme is a government-backed investment option that provides a fixed rate of interest and tax benefits. The scheme was launched by the Indian government in 1968 to encourage long-term savings and investment in the country. It is a popular investment option due to its low risk and guaranteed returns.
How does the Public Provident Fund (PPF) scheme work?
The PPF scheme is available to all Indian residents, including minors, and can be opened with any nationalized bank or post office. The minimum investment amount required to open a PPF account is Rs. 500, and the maximum investment limit is Rs. 1.5 lakhs per year. The scheme has a tenure of 15 years, and it can be extended for an additional five years.
PPF Interest rate and Tax Benefits
Investments made in the PPF scheme are eligible for tax benefits under Section 80C of the Income Tax Act, and the interest earned is tax-free. The current rate of interest on PPF accounts is 7.1% per annum, compounded annually. The interest is calculated on the minimum balance in the account between the 5th and last day of every month.
PPF Limit in a year
Investors can make deposits into their PPF account in the form of cash, cheques, demand drafts, or online transfers. The deposits can be made in lump sum or in installments, as long as the total amount does not exceed the maximum investment limit of Rs. 1.5 lakhs per year.
Withdrawals from the PPF account can only be made after the completion of the sixth year of the scheme. The withdrawals are subject to certain conditions, and the amount that can be withdrawn is limited to 50% of the balance at the end of the fourth year or the balance at the end of the immediate preceding year, whichever is lower. Partial withdrawals can be made only once every year.
Read more about PPF withdrawal rules : What are the PPF withdrawal rules?
PPF Maturity Period
At the end of the 15-year tenure, the account holder can choose to withdraw the entire balance or extend the account for an additional five years. If the account is extended, the investor can continue to make deposits into the account, but withdrawals can only be made once a year.
The Public Provident Fund (PPF) scheme is a popular investment option that provides a safe and secure way to build a retirement corpus or to meet long-term financial goals. The scheme offers tax benefits and a fixed rate of interest, making it an attractive investment option for risk-averse investors. However, investors should carefully consider the investment limits, withdrawal rules, and other terms and conditions of the scheme before investing.