PPF (Public Provident Fund) Account is a long-term investment and is debt scheme under Government of India on which the investor earns regular interest. Any one is eligible for this scheme being the citizen of India and avail the tax free returns, which is generally higher than the return on fixed deposit. One can deposit the amount through online transaction if the account holder has the account in bank; in case of PPF account opened in Post Office there is no online deposit benefit. PPF account has a very simple opening and activation procedure and it takes mere 30 minutes if you have all the documents ready which includes the complete filling of form, a photocopy of identification proof, address proof and a photograph. PPF offers good interest rate and is a good option to channelize your incomes for a long-term basis.
There are two prime benefits of holding a PPF account. One may note the major benefits availed from PPF account mentioned below:
1) One of them being the benefit one avails under section 80C of Income Tax Act. The investment done in PPF account in India can be applied for deduction under 80C thereby reducing the total taxable income.
2) The second major benefit being, the tax free returns on the investment. The account holder does need to pay tax on the interest earned on his or her PPF account.
If we compare PPF account with fixed deposit we can see some striking difference. In general, the interest earned on fixed deposit is higher as compared to PPF interest rate, but one should also notice that, interest earned on PPF is tax exempted where as the interest earned on fixed deposit is subjected to taxation. Therefore, one must look at the net calculative gain. Thus, computing the interest earned on fixed deposit post tax deduction, it comes to conclusion that the effective interest is higher for PPF as compared to fixed deposit. In addition to that, on PPF account one is also availing the benefits of deduction under section 80C of Income Tax to a fixed limit.
Besides above mentioned benefits, public provident fund is a good long-term investment idea. Everyone needs to channelize their income among long-term and short investment and PPF has a proven long-term benefits.