What is Public Provident Fund?
Updated On Nov 20, 2021
Table of Contents
The Public Provident Fund is a savings scheme that was initialised by National Savings Institute however it has made some efforts to be more flexible by absorbing some national and private banks. It’s a reliable and one of the safer schemes as it is enforced by the government and channelised through the Post Office.
Along with those guaranteed returns comes a good interest rate that is paid on 31st of march every year.it does come with a lock in period of 15 years this scheme is open to all Indians except Non-Resident Indians and HUFs.
Benefits of A PPF Account
Benefits of a PPF account are:
1. Policy Span
The minimum life span which is defined by the lock in period for a PPF account is 15 years which ensures that you are disciplined with the way you save so that you can reach the desired funds for your aim of investment.
Must Read: Know Everything About SBI PPF Account
2. Secure and Stable Returns
As mentioned the fund was initialised by National Savings Institute meaning it is a scheme which has government backing making it one of the safest investment opportunities , its interest rate is calculated by the government every quarter as per the securities rate set by the RBI thus making it easy to calculate your returns and plan accordingly.
3. Tax Benefits
The Public Provident Fund falls under the Exemption category meaning that it qualifies for exemptions in investments , interest earned and redemption of funds moreover invest in public provident fund up to 1.5 lakh Rupees annually qualifies for deductions as per Section 80C of Income Tax act thus one can always invest in PPF if looking to earn some tax benefits.
4. Flexibility To Invest
The Public Provident Fund allows the investor to put up money in recurring instalments, one can invest through recurring payments or one can make varied payments throughout the year totalling up to 1.5 lakh per year making it easier to invest accordingly and flexibly.
5. Minimum Investment
An individual looking to invest can start with as low as 100 rupees and the minimum amount that one needs to put down within a year is 500 Rupees making it an easy and ideal opportunity for entry level investors which makes it a highly popular scheme.
Investors have the opportunity to avail a loan against their savings in their respective PPF account , though it comes with a certain restriction to ensure discipline towards long term goal of saving such as one can only borrow between third and the fifth year moreover the amount cannot exceed quarter of the investments at the end of the second financial year. After one is done paying their first loan they have the option to avail a second loan after the sixth year of their investing term.
PPF is one of the safer and stable funds out there to invest in and thus has a wide mass appeal, it’s a suitable option for someone looking to invest for a long term with a desired goal in their mind and it’s just flexible enough with its payment options so that you don’t have to bear stress in your present to plan for your future. It’s loan facility ensures support in times of emergencies. It offers a perfect combination of features that a new entry level investor would look for in his/her portfolio.
Also Read: Which One Should I Choose- SIP or FD?
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.