Public Provident Fund (PPF)PPF is a scheme which is very popular for long term investment which started in year 1968 by government of India. Through PPF account, one can save his hard earned money safely, securely and can book an attractive return on maturity with interests. The main advantage of PPF account which has made it famous is- It is tax free. It means, the amount you are depositing in PPF account and the interest you will be getting- both are tax exempted.
Almost ever bank of India, either government or private, they offer PPF account facility. The interest rate may vary from bank to bank but most of the other features are same.
Who are eligible for PPF accountAny Indian resident can own PPF account. Individuals can even have PPF account on behalf of their minors but the minimum and maximum deposit limit is same applicable in case of minors.
Point to rememberThere are some guidelines/points to note with reference to PPF accounts-
How to have maximum benefits from PPF accountPPF account is one among the top tax saving options one can have. It gives good interest on your money that too tax free. But is it what you are looking for? Below mentioned are some key points to maximize your benefits from PPF account-
Open account as early as possibleOwning a PPF account in your early life gives you support when you will need it the most. By the time your children will reach a point when you will have to invest good some for their studies, your PPF account will be matured with great benefits for you. If this requirement does not rises, you have option to extend your PPF account after maturity. So need to worry for that.
During early years, one can save more and invest more- that is again a point supporting this view.
Deposit at the start of monthPPF account interest calculation is following the same old tradition and consider the money deposited before 5th of the month. So, to have an interest for the whole month, make a habit to deposit your money immediately.
Have habit to invest monthly on PPF accountIn most of the cases, people deposit money in PPF account at the year end and that too to save income tax. One should calculate his earning and saving at the start of his financial year. By this calculation, he can estimate his monthly saving and can deposit that in PPF account every month. The advantage is to have interest on monthly basis. By depositing money at the end of financial year, you already have lost the interest for one year.
Select bank with online Fund Transfer facilityNow the technologies have developed and even opted by banks. One should select a bank which will offer him online fund transfer facility. This will let you make fund deposit online when ever you wish. Going physically to the bank branch is time and energy consuming. It may get delayed due to unavailability of time for one or another reason.
Take personal loan from your own accountYes, you can avail a loan facility from your own PPF account after a certain period of time. This option will have lower interest rates than normal interests rates for personal loans. So, if you have substantial amount of money in your PPF account, you can get benefit of it by paying lesser interest rate.
Open PPF account for your kidsBy opening a PPF account for your kids while they are in their childhood, it will get matured by their adulthood. When they will need money for their studies, you will be having their PPF account matured.
ConclusionBy reading all the above mentioned points, you must have learned that there are so many hidden benefits of having a PPF account. So, rush and have a PPF account if you still do not have and avail the life time benefits to secure your future.
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Thanks, this article was quiet insightful. I have following additional questions on PPF. It will be great if these could be answered -
1. What are the conditions for opening kids PPF account?
2. Is the principal amount tax free or taxable in case of PPF account of kids?
3. Is the interest income on kids PPF account taxable?
4. What happens to a PPF account after 15 years?
5. What is the difference between PPF and EPF ? Aren't they the same thing? Why is government running two different kind of provident funds ?
My following article on the subject matter is available in the ISC repository -
Answers to some of the queries of the member Vinay Jain raised above are available in said article.
Also regarding his point number 5, it is informed that PPF, is a statutory scheme by the central government which can be availed by all eligible individuals whereas the EPF scheme is applicable only in the case of salaried employees. Under EPF scheme both the employee and employer contribute 12 per cent of the employees basic salary amount each month and deposit with the Employee Provident Fund Organization (EPFO). The accumulated amount can be withdrawn at the time of retirement or resignation.