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Everything You Need to Know About Public Provident Fund

Published On Aug 07, 2021

The Ministry of Finance in the year 1968 introduced the Public Provident Fund Scheme, which is a tax saving avenue offering 7.6% interest rate. It was basically introduced to inspire salaried individuals regarding savings, the minimum deposition amount in PPF account is quite economical. The key benefits of investing in the PPF account is that it offers tax deductions and being a scheme backed by the government is easy to comprehend and the amount invested in a PPF account is secure. Let us understand the salient features and benefits offered by a PPF account.

Key Features of PPF (Public Provident Fund)

Highlighted below are some of the key features of a Public Provident Fund or PPF:

  • An interest rate of 7.6% per annum is offered by a Public Provident Fund account.
  • A Public Provident Fund account has a duration of 15 years.
  • Renewal of additional five years is permitted at a time.
  • The yearly deposit amount is minimum Rs. 500, on the other hand maximum yearly deposit amount is 1.5 Lakh.
  • Loan facility offered under Public Provident Fund is from 3 years to 6 years.
  • The procedure of transfer of funds between the post office and bank branches is quite simple and free of charge.
  • A Public Provident Fund account offers interest which is applicable for receiving tax benefits. Also, the cash deposited in the account is also allowed for tax deductions as per section 80C of the
  • Income Tax Act. And the withdrawals done towards the PPF a/c are also free from tax under wealth tax.
  • Once completing seven years with the Public Provident Fund account, a person is allowed to make 1 withdrawal per annum. The entire withdrawal of the fund can be done after the duration of a/c is over and it has matured.

Advantages of Investing in PPF Account

Some of the major benefits offered by a Public Provident Fund or PPF account is as follows:

  • A Public Provident Fund is a good option for planning retirement as with a disciplined saving style, one can easily design a great financial cushion for their future and both capital appreciation and tax free returns add to it.
  • A PPF is a useful long term investment with a duration of 15 years, and it offers a lock-in period of seven years. With good interest rates compounded on a yearly basis, the Public Provident Fundhelps in making effective returns in comparison to bank Fixed Deposits.
  • A Public Provident Fund is a scheme backed by the government, it includes lower risk of default and is considered to be a safe investment option for financial planning.
  • Being a scheme backed by the government, creditors or court orders cannot lay claims to PPF.
  • Other than being a good option for retirement planning, a public provident fund also offers tax exemption on the deposited money and withdrawals done as per section 80C of the Income Tax Act.
  • An individual can open a PPF account at any authorized and nationalized government and public sector banks and also post offices. Also, an individual can now open a PPF account too.

In a Nutshell

A Public Provident Fund is a good financial instrument that does not only assist you in saving an ample amount for your life post retirement, however, it also works as a good investment for tax saving in a longer run.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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