Understanding Public Provident Fund And Its Benefits
Updated On Jan 10, 2022
Table of Contents
The National Savings Institute developed the Public Provident Fund, but it has subsequently expanded to incorporate other national and private organisations in order to become more adaptable. It is a dependable and safe plan because it is governed by the government and handled by the Post Office.
In addition to the guaranteed returns, a reasonable interest rate is paid on the 31st of March each year.
This scheme is open to all Indians, except Non-Resident Indians and HUFs, and has a 15-year lock-in period.
PPF Account Benefits
The following are some of the advantages of having a PPF account:
The Public Provident Fund allows investors to invest in recurring instalments, make varying payments throughout the year totaling up to 1.5 lakh per year, and invest accordingly and flexibly.
Invest The Bare Minimum
The lowest amount that must be put down within a year is 500 rupees, making it a simple and wonderful option for first-time investors, making it a popular plan.
The lock-in term for a PPF account is 15 years, which ensures that you remain disciplined in your savings so that you can reach the desired amounts for your investment goal.
Returns That Are Secure And Consistent
The fund was founded by the National Savings Institute, signifying that it is a government-backed plan, making it one of the safest investment options available. The government calculates its interest rate quarterly using the securities rate established by the RBI, making it easy to assess your returns and prepare accordingly.
Benefits From The Tax System
The Public Provident Fund is classified as an Exemption, which means it is eligible for tax breaks on investments, interest, and fund redemption. PPF investments up to 1.5 lakh Rupees annually are also eligible for deductions under Section 80C of the Income Tax Act, thus it's always a smart idea to invest in PPF if you want to save money.
Investors can take out a loan against their PPF account savings, though there are some restrictions to ensure long-term savings discipline, such as borrowing only between the third and fifth years, and the amount borrowed cannot exceed a quarter of the investments at the end of the second financial year. When paying off their first loan, investors can apply for a second loan after the sixth year of their investment term has passed.
Because PPF is one of the safest and most reliable funds to invest in, it appeals to a wide range of consumers.It's a wonderful choice for someone trying to invest for the long term with a specific goal in mind, and its payment options are just flexible enough that you won't have to worry about paying for it right away.Its loan programme provides assistance in times of need. It provides the ideal mix of characteristics for a new entry-level investor's portfolio.
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.