PPF or Public Provident Fund is a long term investment scheme introduced by the government to provide a safe investment option for long term to individuals. The Employees Provident Fund Organization manages it. Along with giving this investment option, the government also encouraged investment in it by providing attractive rates of interest and tax benefits on the interest earned.
You can open a PPF account through any post office or a nationalized bank like SBI, PNB, etc. In view of providing more services to their customers some of the private banks like Axis Bank, ICICI Bank have also gained the authorization for opening a PPF account. To open the account, you will have to fill a form and submit an identity proof, address proof, and signature proof. After submitting these documents, you can deposit the amount in your account. In the recent development related to the corona virus outbreak, the government has slashed the rate of PPF to 7.10%. However, the rate of interest on PPF is revisited every quarter. Thus, given long term objectives, the present rate of interest is not a significant factor due to the situations which forced its implementation.
However, before you decide to invest in PPF, you must know about it. So, here are five things to know about PPF account :
- To invest in PPF a minimum of Rs. Five hundred of investment is required. This makes it possible for people in the lower middle class also to be able to invest in it. While the maximum amount that you can invest in a financial year is Rs. 1.5 lakhs. The maximum limit is set for an individual and not for an account.
- An individual can open a PPF account for himself, or for a minor or for a person with an unsound mind of whom he is the guardian. The application for PPF is made through Form-1. And as stated earlier, the maximum limit is for an individual. Thus, a person can invest a maximum of Rs. 1.5 lakhs in a financial year irrespective of the number of accounts under him.
- In case you discontinued making an investment in PPF for a few years and now want to revive it again, then you can freely do so by submitting a fee of Rs. 50 along with the minimum deposit arrears of Rs. 500 for each year which was missed. Thus, considering it has a lock-in period of 15 years, then the minimum investment you have to make in 15 years is Rs. 7,500.
Understand provident fund is different than PPF which has a lock-in period of 15 years. Although you can make a partial withdrawal after five years of completion. But, the withdrawal is allowed only under certain specified conditions, and you need to provide the necessary documents to prove that such specified conditions exist. Also, you can extend the period of PPF account after the maturity period of 15 years in the block of 5 years as many times as you want. When you extend the period, you will also have the option to either continue investing in installments or make a lump sum investment for the next five years.
Another significant benefit you get with a PPF account is that it is not liable to any attachment with respect to any order or decree of the court. Thus, your investment in PPF is safe and secure irrespective of anything.
Along with the various critical points discussed above, PPF has a special status of Exempt-Exempt-Exempt under Income Tax Act. This means that all the deposits made into PPF accounts are exempt under section 80C of the Income Tax Act. Further, the interest earned and the maturity amount of the investment is also exempt from the income tax.
