Salient Features Of PPF

Firstly, PPF stands for Public Provident Fund, and it is an investment vehicle. It was first offered by the National Savings Institute in 1968. The PPF is unique and you can invest in it to earn hefty returns and save money. 

The PPF is also called a "savings-cum-tax savings" investment. You do not pay tax on the money that you invest in a PPF. Neither do you have to pay tax on the interest that it earns. 

Here's how this investment vehicle works. A PPF account is like a subscription. You have to deposit an amount in multiples of fifty, starting with a minimum amount of Rs. 500 to a maximum of Rs. 1,50,000 in a year. This investment cycle continues for 15 years, and you can invest in it further by extending it for five years.

What Are The Essential Features Of A PPF Account?

Before you decide to start a long-term commitment with PPF, take a look at some of the features of PPF.

• Every person can have only one PPF account. Multiple PPF accounts are not allowed.
• A guardian or a parent can start a PPF account for a minor under their care.
• You cannot have any joint accounts under the PPF scheme.
• A person has to deposit amounts in multiples of fifty in a year, with a starting amount of Rs. 500 and a maximum amount of Rs. 1,50,000.
• You can make these deposits in a lump sum or installments.
• An account stands discontinued if a person fails to deposit the minimum amount in a year.
• You cannot open another PPF account if you have a discontinued account.
• You can transfer money to the PPF account by cash, cheque, DD, or online fund transfer.
• You can designate a nominee at the time of opening the account.
• The interest earned by the PPF account is set by the Finance Ministry each year. At present, in 2021, it is fixed at the rate of 7.1%.
• PPF interest is calculated monthly on the lowest amount deposited. This calculation takes place after the fifth of every month.
• Hence PPF subscribers are advised to deposit their cash after the fifth of each month.
• The interest is credited to the account at the end of the financial year rather than monthly.

These were some of the major and most striking features of the PPF account.

What Are The Benefits Of A PPF Account?

Why should a person invest in a PPF account? Here are some of the major PPF benefits that a person can enjoy when investing in PPF.

• Tax benefits

The most popular reason for choosing a PPF account is the vast tax benefit that you get. The principal amount is exempt from taxation, provided that you do not exceed the Rs.1.5 lakhs limit. Laws that govern this are set out under Section 80C of the Income Tax Act. When the amount is redeemed after maturity, it is still not subject to taxation. Hence, you can invest yearly a sum of up to Rs.1.5 lakhs completely tax-free.

• Stable and secure returns

Since PPFs are government-backed schemes, they are stable investments holding a lot of surety and safety for risk-averse investors. You can easily build a retirement corpus for yourself with this instrument as it is a government-guaranteed scheme.

• Long-term lock-in period

A PPF account requires commitment from an investor for fifteen years. Hence you can easily use the money to plan your children's higher education or retirement plans. Even after the 15-year lock-in period, you can continue the investment by extending it for five years at a time.

• Partial withdrawals

While you can make partial withdrawals from the PPF account, you can only do so after the fifth year. The amount you can withdraw is equal to 50% of the account balance at the end of the preceding year.

• Loans against the PPF

Individuals can acquire a loan against their PPF account between the third and sixth year of opening a PPF account. Borrowers will have to repay the loan amount within three years from the date of disbursement.

Conclusion

In conclusion, PPF is one of India's safest investment options. Any resident of India can open a PPF account and take advantage of the safe, secure, long-term, and tax-free investment option.

Also read- Which ICICI Prudential Life Insurance Plan Should You Purchase?

Do You Want To Check The Status Of Your LIC Policy? Know How To Do That!