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PPF - Indian Saving Scheme

05 Nov 2016

It is a very general tendency at every Indian home to save. Savings is a habit which Indians are taught at very early stage in life sometimes. Then the course of life is defined regarding this habit for us. When we start earning, we get to know the various options of the savings. We always like to save more for ourselves first and then pay the taxes to the government as per the earning capacity of every individual. 

The government offers the various incentives under the income tax for savings in the different modes. There are slabs for each savings category and also for the overall savings. Under various schemes options available in the market for the savings, we have one very good and attractive savings options which is a government run and government paid scheme named as PPF (Public Provident Fund). For PPF return calculation use out PPF calculator

About PPF

PPF was started as savings scheme and due to the various income tax benefits available, it has become an income tax savings scheme over a period of time. The PPF account can be opened in the banks by the individuals. The maximum amount that an individual can put in the ppf account in one year is Rs. 150000 and the minimum being Rs 500 per year.

However, there is no restriction on the maximum amount of the deposit by an individual, yet the benefit of interest and also the tax savings benefit is only available till this amount only and beyond this amount deposited in one financial year period, the interest is not paid and also the tax savings under section 80 (c) is also not available. 

The Public provident fund account can run for a maximum of 15 years after the date of opening. Thereafter the individual can exercise the withdrawal. The account is further extendable with two options available to the depositor. The one option comes with account running without further contribution which is default option in case the depositor does not withdraw the amount and the other being with the contribution. In any case after the original maturity of 15 years, the account can be extended in the blocks of five years subsequently. 

Apart from the higher interest rate offered by the PPF account in comparison to the FDs in the bank and also the tax savings features available, the scheme is very attractive for all passive investors or who need to build a risk free corpus. The scheme also allows the depositor to pre-maturely withdraw the amount equivalent to 50% of the total deposit amount. 

However, this is maximum amount and the amount which can be withdrawn under the scheme is amount which is deposited in the account in the 4th year preceding the year in which either it is withdrawn or the amount available in the immediate preceding year whichever is lower. Thus the depositor has the option to meet the personal need also. 

The other feature of this scheme is granting loans against the deposited amount to the depositor. The depositor may take the loan upto 25% of the amount available in the account on 2nd preceding year from the year in which the loan is being taken. The rate of interest that is to be paid by the depositor on such loan is 2% higher than the rate being offered in the PPF account. Further the loan can be taken for a maximum period of 36 months. 

The ppf account can be opened in the banks and post offices. The nomination facility is available in the account for faster claim processing. One of the most salient features available with the scheme is that the interest amount earned during the course of the deposit and also at the time of the withdrawal, the same remain tax free which is unlike any other scheme. The government allows this under the EEE (Exempt, Exempt, Exempt) category of the accounts. The other EEE accounts are insurance accounts in which this salient feature is available. This feature itself makes the scheme very popular.

In case the depositor is deceased, the scheme allows the legal heirs or nominees to withdraw the amount. In case the amount is more than Rs 150000, the identities of the nominee or legal heirs is to be proved by them to settle the claim amount. In the case of the account being deactivated, to make it active, the penalty of Rs 50 is to be deposited with the fund agency along with theregular subscription amount with the minimum being Rs 500 as prescribed in the scheme.

The latest rate of interest on ppf is 8.10% p.a. and ppf interest rate can be revised by government as and when needed.

Last Modified: Sunday 06 November 2016 02:54

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