PPF Investment Scheme: PPF is considered one of the most reliable and secure savings schemes in the country. This scheme is run by the government and provides stable and tax-free returns to long-term investors. While salaried individuals usually have Employee Provident Fund (EPF) deductions from their salaries, PPF is a separate scheme in which anyone can invest voluntarily. This is why salaried individuals, self-employed individuals, and housewives all invest in this scheme.
PPF Scheme: Commencement and Tax Rules
The Public Provident Fund scheme was launched in 1968 under the Public Provident Fund Act. It is managed by the Department of Economic Affairs of the Ministry of Finance, Government of India. PPF falls under the EEE category of taxation, which means that the invested amount, the interest earned, and the maturity amount are all completely tax-free. The interest rate on PPF is determined by the government from time to time, and is currently 7.1 percent.
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How and How Much Can You Invest in PPF?
Opening a PPF account does not require a large sum of money. Anyone can start investing with just ₹500. A minimum of ₹500 and a maximum of ₹1.5 lakh can be invested in a financial year. The investment can be made in a lump sum or in installments throughout the year. However, more than 12 installments are not allowed in a year, and the amount must be deposited in multiples of ₹50.
How Much Return Can You Get from a PPF Investment?
If an investor deposits ₹50,000 in PPF every year, their fund can reach approximately ₹13.5 lakh after 15 years, based on the current interest rate. Similarly, if a person invests the maximum amount of ₹1.5 lakh every year, this amount can grow to more than ₹40 lakh in 15 years. If the investor extends the account even after maturity, the returns can increase further.
Rules for Withdrawing Money from PPF
The maturity period of a PPF account is 15 years, which is also called the lock-in period. However, the government has provided the facility to close the account prematurely under certain circumstances. A PPF account can be closed prematurely for needs such as the treatment of serious illness or the higher education of children. In this case, the investor has to bear a one percent deduction on the accrued interest.
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Loan Facility on PPF Investment
A PPF account is not only a means of saving but also provides a loan facility when needed. The investor can apply for a loan between the third and sixth years of opening the account. The loan amount is limited to a certain percentage of the balance in the account. Generally, a loan of up to 25 percent of the total deposited amount can be taken. The interest rate on this loan is one percent higher than the interest rate earned on the PPF.