Public Provident Fund (PPF) is a long-term investment plan backed by government of India on which regular interest is paid. Since it is backed by government, it has an added sense of security with it. It’s a very useful scheme if the investments are made considering it as retirement plan. Until the age of retirement a good amount of money is accumulated in the PFF account, given the person started making deposits at an early age.
Any person, no matter salaried or not, can open a PPF account. But NRI’s cannot invest money PPF’s. However, if any Indian citizen is having a PPF account and before the maturity becomes an NRI then account will remain in force and the investment will be allowed. However, NRI’s cannot extend the PPF account. They need to withdraw the money on maturity.
PPF accounts can be opened at State Bank of India branches or subsidiary branch of State Bank of India. Selected nationalized banks also provide this facility. A minimum amount of Rs 500 is required to be deposited by the account holder in a financial year. And the maximum deposit is Rs 70,000. Deposits can be made as per the convenience, with maximum 12 installments during one fiscal year. 8% annual interest is given, which is calculated on the lowest amount between the 5th and the last day of each month. Duration of investment in PPF is of 15 years. We can choose to extend the PPF further after the maturity.
The investment in PPF account comes under section 80C, thus the entire amount is non-taxable on maturity. However, only the person, who is making the deposits, gets the tax benefits. We can have a rebate of only INR 70,000 in a year due to the upper limit of deposit in PPF’s per year.
We can take loan on our PPF deposits. Bank will grant loan from 3rd year onward until the sixth year and we need to pay it back in 24 months. Bank will charge additional 2% than the PPF rate provided by the government. A second loan can be taken between 3rd and the 6th year only after full payment of the all previous loans.
We cannot withdraw entire amount from the account before maturity. From 7th year onwards we can withdraw money, not more than 50% of the available amount, once a year. Only in case of death the entire amount can be withdrawn before maturity.
With a long investment in mind investing money in PPF account is surely a good idea.