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Understanding The Many Benefits of PPF Account

Updated On Dec 11, 2021

The Public Provident Fund (PPF) is a popular long-term savings system that focuses on encouraging small savings, such as investments, and earning returns on them. PPF is a government-sponsored savings plan that offers a competitive interest rate and investment returns. This plan is frequently used as a prerequisite for retirement financial needs. It has a 15-year term, although the subscriber can request a 5-year extension. In rare instances, partial withdrawal is permitted.

Individuals who have a limited risk appetite should consider a public provident fund. This plan is backed up by guaranteed returns because it is mandated by the government to defend the financial needs of the Indian people. In addition, the PPF account's invested funds are not tied to the stock market.
Investors can diversify their financial and investing portfolios by joining a public provident fund. PPF accounts can help you preserve your capital during downturns in the business cycle.

Benefits of Investing In A PPF Account

Given below are some of the benefits you can access by investing in a PPF account:

  • Withdrawal

If a person wishes to withdraw money from his or her PPF account, he or she must follow a number of rules.

The primary amount invested in such plans is subject to a 15-year mandatory lock-in period. Partially withdrawing can be done in emergency situations involving specialised end-uses. This money, however, can be withdrawn only when the account has been active for 5 years.

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  • Flexibility In Investment

You can invest in monthly instalments by linking it to your Savings Bank account, or you can invest in lump sums throughout the year. Payments can be made monthly, bi-weekly, quarterly, or annually. Budgeting is a breeze now. This scheme allows for annual instalments of up to Rs 1.5 lakh.

  • Benefits from the Tax System

The principal amount invested in a PPF account is eligible for income tax exemptions. Section 80C of the Income Tax Act of 1961 allows you to claim a tax break on the entire amount of your investment. However, the maximum amount of money that can be invested in a single financial year is Rs. 1.5 lakh.

  • Consistent Profits

PPF has sovereign status as a government-backed savings institution, making it a very safe investment.

The government sets the PPF interest rates every quarter, which are related to government-securities rates. As a result, you can evaluate your investment's potential returns.

  • Investment Risk

PPF is a government-sponsored plan that guarantees risk-free returns. The return on the PPF is guaranteed by the government and is not affected by market volatility.

  • Criteria for Applicant

Citizens of India who are residents in the country are entitled to register a PPF account in their own name. Minors may open a Public Provident Fund account in their name as long as it is managed by their parents.

A new PPF account cannot be opened by non-resident Indians. Any existing account in their name, on the other hand, will stay operational until the term ends. These accounts are only available to Indian residents and can only be extended for 5 years.

Take Away

As mentioned in the prior article, the Public Provident Fund (PPF) is one of the most popular retirement savings vehicles for the working class (PPF). The long-term investment horizon and the magic of compounding may be the key reasons for its attraction, in addition to the income tax exemption it has received. By investing in the PPF, policyholders receive a variety of benefits. It's a well-considered investment approach that considers all variables.

Also Read: Which Is The Best Investment Plan For 3 Years?

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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