Public Provident Fund (PPF) is the Best Tax saving as well as Investment Scheme sponsored by the government of India. Any Individual (whether Salaried or Self-Employed or any other category) can invest in this scheme and can earn a handsome tax-free return on the same which is usually higher than the return offered by Banks on Fixed Deposits. PPF can be opened in a post office or designated branches of banks. The key features of the PPF account is enumerated below:
Minimum & Maximum deposit limit in PPF
A minimum of Rs. 500/- is to be deposited in PPF account in a financial year. The maximum amount that can be deposited in PPF account is Rs. 100000/-. The amount can deposited in lump-sum or in installments but not more than 12 installments in a year.
PPF Interest Rate
For the financial year 2013-14 the interest rate is 8.70 %.The interest on your PPF balance is compounded annually, but the calculation is done every month. The interest is calculated on the lowest balance between the fifth and last day of every month.
Income Tax Benefits
The investment in PPF is eligible for tax deduction under section 80 C.
The interest earned in PPF account is totally tax free.
Tenure / Maturity Period
A PPF account matures in 15 years. However the account holder has an option to extend the PPF account for any period in a block of 5 years on each time.
Pre – mature closure of PPF
Pre-mature closure of a PPF Account is not permissible except in case of death.
Pre – mature withdrawal from PPF
There is a lock in period of 5 years in PPF Account. So, one can partial withdraw from PPF account after the expiry of 5 years from the end of financial year in which the initial deposit was made. It means one can withdraw from PPF account from 7th year. One can withdraw only once in a year. Such withdrawals, must not exceed, 50% of the balance at the end of the fourth year, or 50% of the balance at the end of the immediate preceding year, whichever is lower.
Loan on PPF Account
Loans can be available from the 3rd financial year excluding the year of deposit. Amount of such loans must not exceed 25 percent of the amount that stood to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied for. Interest rate is 1% if repaid within 36 months and at 6% on the outstanding loan after 36 months. The repayment may be made either in lump-sum or in Installments. A fresh loan is not allowed when previous loan or interest in pending.
The balance amount in PPF in PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.
The deposit in PPF account is also exempt from Wealth Tax.
Nomination facility is available in PPF account.