The Public Provident Fund (PPF) program was introduced in India for the first time in 1968. The scheme’s main objective is to encourage modest savings among people and to provide returns on those savings. Interest rate returns aren’t taxed when they are generated.
Public Provident Fund (PPF) schemes are long-term investment options that offer competitive interest rates and returns on investment. Under this program, a PPF account must be opened, and the annual deposits are eligible for section 80C deductions. Taxation on income does not apply to either the interest or the returns that are earned. Investors use the PPF as a tool to create a corpus for their retirement by consistently saving over a long period of time.
Key takeaways PPF:-
|Withdrawal Permissible||Every year from 7th FY|
|Interest Rate ( 1/4//20-31/3/23)||7.1%|
|Withdrawal Allowed||Every year from 7th FY|
|Maturity Period||15 years (extension for a block of 5 years|
|Deduction||Qualifies under section 80 of IT Act|
|Tax benefit||upto 1,50,000/- per year|
|Amount in PPF Account||not subject attachment under any order|
If you meet the conditions listed below, you can open a PPF account with relatively few requirements. You are a citizen of India. You may only open one PPF account, so long as it is not opened in a minor’s name. You cannot invest in PPF if you are a HUF or an NRI.
Features & Benefits:-
- A PPF has a 15-year minimum term. If you’d like, you can extend it in 5-year increments.
- PPF allows investments starting at Rs 500 and going up to Rs 1.5 lakh per fiscal year.
- Acceptable methods of deposit into a PPF account include cash, checks, demand drafts (DD), and online fund transfers.
- Only one person may hold a PPF account; joint names cannot be used to open an account.
- When opening the account or later, a PPF account holder may choose to name a nominee for the account.
- Due to the support of the Indian government, PPF offers guaranteed, risk-free returns and complete capital protection.
- Because PPF accounts have fixed returns and are exempt from taxes under Section 80C of the Income Tax Act of 1961, PPF accounts are a useful tool for portfolio diversification.
How does it work?
From Rs. 500 to Rs. 1.5 lakh can be deposited into a PPF account each fiscal year. Throughout the tenure, the deposits must be made annually, and they are exempt from income tax under section 80C. The deposit is subject to a 7.1% p.f. (Q4 FY2022-23) annual compound interest rate. For the remaining sum, a loan facility is offered. A loan facility is offered on the unclaimed PPF balance. You must maintain the account open by making a minimum deposit of Rs. 500 each fiscal year.
The Exempt-Exempt-Exempt (EEE) category of investments includes Public Provident Fund.
According to Section 80C of the Income Tax Act, all deposits made to a PPF account are tax-exempt. The current PPF interest rate for the fourth quarter of FY 2022–23 (January–March) is 7.1%. The Public Provident Fund offers higher interest benefits when compared to the comparable fixed deposit (FD) rates in many banks.