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Equity Fund

Introduction 

The Public Provident Fund (PPF), a cornerstone of prudent financial planning, was introduced by the Government of India with the aim of fostering a culture of systematic savings. Widely embraced by the masses, PPF stands out as a long-term investment scheme renowned for its attractive interest rates, robust returns, and a host of safety features.

 

Enshrined with the added advantage of tax exemption under Section 80C of the Income Tax Act, PPF allows individuals to channelise their savings while enjoying fiscal benefit, offering a compelling avenue for those seeking both financial growth and tax efficiency.

 

In the following Blog, we will delve deeper into the various facets of the Public Provident Fund, unravelling its nuances and elucidating how it stands as a formidable savings option, catering to the diverse financial needs of individuals across sectors.

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What is the Public Provident Fund?

The Public Provident Fund (PPF) is a popular long-term savings and investment scheme introduced by the Indian government. It encourages regular savings while providing attractive returns and tax benefits.

What are the features of PPF?

  1. Tenure: PPF has a fixed tenure of 15 years. However, account holders can extend it in the block of 5 years after maturity.

  2. Investment Amount: Investors can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh per financial year. The contribution can be made in one or multiple instalments.

  3. Tax Benefits: PPF enjoys EEE (Exempt, Exempt, Exempt) tax status. Contributions to PPF are eligible for a deduction under Section 80C of the Income Tax Act. The interest earned and the maturity amount are tax-free.

  4. Interest Rate:  The government determines the interest on PPF which is compounded annually. The interest rate is subject to change periodically. Currently 7.1% per annum

  5. Flexible Contribution Period: Account holders can choose to contribute to their PPF account for a period of 15 years. After maturity, they can extend it in blocks of 5 years.

  6. Withdrawals: Partial withdrawals are allowed after completing the 7th year of the PPF account. The amount that can be withdrawn is subject to certain conditions and limits.

Eligibility Criteria to Open a PPF Account

The eligibility criteria to open a Public Provident Fund (PPF) account in India are as follows:

1. PPF accounts can be opened only by resident individuals. Non-resident individuals are not eligible to open a PPF account.

2. Any resident individual can open a PPF account. There is no age restriction for opening a new account. Minors can also have a PPF account with a guardian.

3. An individual is allowed to open only one PPF account in their name. Joint accounts or multiple accounts in the same individual's name are not permitted.

4. In the case of a minor, the account can be opened by a natural guardian (either parent) on behalf of the minor. The guardian will operate the account until the minor turns 18.

Note: Hindu Undivided Families (HUFs) and non-individual entities such as trusts and companies are not eligible to open a PPF account. Only individual residents can hold a PPF account.

What is the interest rate in a PPF?

The interest rate on a Public Provident Fund (PPF) is not constant and is subject to periodic adjustments by the government. The PPF interest rate has demonstrated stability compared to other small savings schemes. The recent annual interest rate on PPF is 7.8%. The interest is compounded annually, implying that it is calculated on the principal amount, including the interest accumulated in previous periods. The accrued interest is credited to the PPF account at the conclusion of each financial year.

How to Open a PPF Account?

To open a Public Provident Fund (PPF) account in India, you can follow these steps: