How Can You Utilize PPF In The Best Way Possible?
Updated On Aug 17, 2021
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Public Provident Fund (PPF) is one of the most popular small savings schemes among Indians for long-term investments. It is a popular debt option since it guarantees a return. It is also more tax-efficient than most other products, such as bank fixed deposits (FDs). It has an exempt, exempt, and exempt (EEE) tax status, i.e., investing in a PPF, or Public Provident Fund, is tax-free, as is the interest earned and the accumulations. Let us learn how you can utilize a public provident fund in the best way to maximize your profits.
How Can You Use Your PPF Account?
When one decides to retire, a corpus with a high return on investment due to the interest rate can be helpful. In an emergency, PPF account holders can make a partial withdrawal that is totally tax-free after seven years of account opening. Withdrawals made after the 15-year lock-in period are also tax-free. PPF account users can take a loan against their PPF funds three years after starting the account. The loan interest rate will be lower as a result of this. Finally, the PPF provides dual tax benefits because both withdrawals and interest added to the money in the PPF accounts are tax-free under section 80C of the Income Tax Act.
How Can You Utilize PPF In The Best Way Possible?
The following tips can help you utilize your PPF in the best possible way.
1. You Should Invest At the Start of the Fiscal Year
Investing in the PPF at the start of the year is always a good idea. You will earn interest on your deposits for the full year in this manner. Most people make large contributions in their PPF account at the end of the financial year, in March, in order to claim the Section 80C deduction. In a given year, a tax deduction of up to Rs. 1.5 Lakh can be claimed on investments made in a PPF account. However, if you wait until the end of the year to invest, you will lose out on the year's interest.
2. You Should Invest By the 5th of Every Month
If you make monthly contributions to your PPF account by investing before the 5th of every month, it will help you receive the most profits, as interest rates are computed monthly and compounded to your PPF contributions, as opposed to investors who invest after the 5th. Hence, you can maximise your gains by investing before the interest calculation date for a given month.
3. You Should Open a PPF Account with a Bank That Allows You to Send Money Online
PPF is a long-term investment plan, and to get the most out of it, you must keep investing regularly. If you don't have any other choice but to visit your bank or post office to make cash payments to your PPF account, you're likely to miss instalments frequently. Suppose your bank, on the other hand, enables direct internet banking transfers to your PPF account. In that case, you are more likely to contribute regularly, increasing your chances of maximizing profits.
Take Away
Remember that even a few hundred bucks in interest earned each month can go a long way toward maximising your PPF profits in the long run. Hence, in order to maximise the interest you receive, you can use the strategies described above.
Also read - Are Mutual Funds A Good Choice Of Investment?
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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.
