Public Provident Fund (PPF) is one of the most popular long-term savings schemes run by the Government of India. This scheme is especially popular among the salaried class and people preparing for retirement. In this scheme with a lock-in period of 15 years, the investor gets guaranteed returns, and it is also completely tax-free.
PPF is a government investment scheme that was started in 1968. Its objective is to give the common people an opportunity to create a big fund through small savings. This scheme is for 15 years, and if the investor wants, he can also extend it for a period of 5-5 years. Its biggest feature is that this investment is safe and comes with a government guarantee.
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Annual investment and interest rate
At present, 7.1 percent annual compounding interest is being received on PPF. In a financial year, an investor can deposit a minimum of Rs 500 to a maximum of Rs 1.50 lakh. This amount can be deposited at once or in installments. If a person invests the maximum amount for 15 years continuously, the total investment will be Rs 22.50 lakh. Interest on this investment will give an additional profit of about Rs 18.18 lakh, and a fund of about Rs 40.68 lakh will be ready on maturity.
Completely tax-free scheme
The biggest advantage of PPF is its tax-free category. This scheme falls under the “EEE” (Exempt-Exempt-Exempt) category. This means that the investor can claim tax exemption under section 80C by investing up to Rs 1.50 lakh annually. Apart from this, the interest received and the amount received on maturity also do not come under the purview of tax.
Rules for closing the account before the time
If the investor does not deposit at least Rs 500 in his account in any financial year, then the account is considered closed. However, it can be restarted. For this, the investor will have to pay a penalty of Rs 50 for every default year and invest a minimum of Rs 500. At the same time, there are some special conditions for closing the account before the time, such as serious illness, education expenses, or job loss.
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For whom is it a better option
PPF is an ideal option for those who want to invest for a long time without any risk. This scheme can prove to be very beneficial, especially for the middle class and people preparing for retirement. The interest received in this is safe, and tax savings are also available.