PPF - Public Provident Fund

Back in 1968, the Ministry of Finance (MOF) in India announced a tax-free saving Boulevard called The Public Provident Funds (PPF) Scheme, 1968. The scheme offers interests to individuals that are not taxable. Moreover, these deposits help you get tax deductions. This system was introduced with the view to boost savings by the Indians and have a good retirement amount. The scheme works by placing funds in PPF account for a fixed period of time ending up earning adequate returns on savings.

You can contribute to PPF account and get tax benefit under the Section 80C of the Income Tax Act. Any interest earned is exempted from income tax. The maturity proceeds are also exempted from tax.

Key Features

  • The central government declares the interest rates periodically, mostly annually. The earnings are further compounded annually. The current interest rate today is 8.1% p.a.
  • The tenure is usually 15 years. One can continue beyond maturity by renewing the account every 5 years. This does not require any compulsory additional deposits.
  • The initial deposit or investment requires Rs. 100 while opening the account.
  • According to the government directive, the annual deposit can be made ranging from Rs. 500 to 1.5 lakhs each year.
  • The deposit frequency is essentially once a year for the next 15 years to keep the account active. Failure to making a minimal investment can lead to inactivation of your account.
  • The payment can be through Cash, Cheque, DD, PO, Online transfer, one-time deposit not more than 12 instalments.
  • The withdrawals can be done partially each year beginning from the 7th year. However, the withdrawals are subject to conditions. One has to wait until maturity for complete removal.
  • A person enjoys tax benefit as the interest is a tax-free income. U/S 80C, the sum is deductible from taxable income.
  • The nomination is allowed on opening the account or later.
  • Funds cannot be transferred among people but are permissible among bank branches and post offices for free.
  • A loan can be apprehended against these sums for 3-6 years.
  • No joint accounts are permitted.

PPF is one of the optimum ways to save for your retirement and enjoy a happy future.