Know What is a PPF Account and Why You Should Consider It
It is the investments and saving that we bank upon during difficult days, so our investment decisions must be carefully made keeping our financial targets in mind. The Public Provident Fund (PPF) is a small government-offered investment tool that can assist you with financial planning.
Here we will take you through what is PPF account, the advantages of opening a PPF and how to open the account.
What is a PPF account?
A popular investment scheme among investors who want to earn high but stable returns is the Public Provident Fund. It is a debt instrument that includes a tax advantage. This scheme aims to safeguard the principal sum that is included in one of the significant investment criteria. You can spend up to around 1.5 lakh in a financial year and get tax benefits on it. The minimum amount you can deposit is INR 500, and the maximum limit is INR 1 lakh to 1.5 lakh.
Under Section 80C of the Income Tax Act, investment in PPF is eligible for a tax benefit. You can also opt for monthly investments in PPF in addition to lump-sum investments. There is a 15-year tenure for PPF, and you can extend it after the 15th year by 5 years. To open this account, you need to be a resident of India. The account may also be opened in the name of a minor.
Why Should You Opt For PPF?
Due to its tax saving advantage, you may want to opt for PPF. If you require cash for big-ticket spending, you can also invest in PPF. To achieve a long-term purpose, such as your child’s education, down payment on a home, prepayment of a loan you have taken, or retirement, you might consider saving in a PPF account.
The power of compounding, in the case of PPF, will enable wealth creation. You should plan to invest at the beginning of the financial year in order to get the most out of the PPF investment.
Here are some PPF account benefits you need to know about:
Risk-Free, Guaranteed Returns
The Government of India backs the Public Provident Fund. So, one of the most critical advantages of the PPF account is that it is fully risk-free. The returns, too, are assured by the state. What is more, even a court order to pay off debtors will not be added to the funds in your account.
Multiple PPF Tax Benefits
The best thing about a PPF account is its exempt-exempt-exempt (EEE) tax status, one of India’s only investments to benefit from such an advantage. The amount you pay up to Rs. 1,50,000 is excluded from your taxable income, the interest you gain is non-taxable, and the amount of maturity you receive is tax-free after 15 years. This makes it one of the most successful investments for tax purposes.
Small Savings, Good Returns
When it comes to the investment amount, the PPF gives you a lot of versatility. You can use as little as Rs. 100 to open an account. You can spend a minimum of Rs. 500 and a maximum of Rs. 1,50,000 per year.
In 12 installments (maximum) or as a lump sum, you can make these investments. The PPF currently provides an interest rate of Rs. 7.6 percent compounded annually (as of June 30, 2018).
How To Open a PPF Account?
After meeting the appropriate eligibility requirements, you can open both offline and online PPF accounts. By visiting the chosen bank or post office portal, you can open a PPF online account.
At the time of activation of a PPF account, here are the documents required:
- KYC documents verifying an individual’s identity, such as Aadhaar, Voter ID, Driver’s License, etc.
- Residential address proof.
- PAN card.
- Passport-sized photograph.
- Form for nominee declaration.
You can check out PPF accounts offered by financial institutions like Axis Bank. They not only offer tax exemption on principal but also gives an interest. You can check the same with the help of their PPF calculator. So, do not wait and check out their online website to apply for a PPF account online.