Whether you are thinking about creating your future wealth or a child’s higher education or a child’s marriage, PPF or Public Provident Fund is one of the best low-risk and high returns offering investment options. This Government backed investment scheme not only comes with tax benefits but also lets you enjoy tax-free returns. Hence, this small savings scheme is the best financial product to secure your financial future.
Main Benefits of PPF
“The PPF scheme offers tax deductions up to Rs 1.5 lakh under Section 80C of the Income-Tax (I-T) Act. Moreover, the returns earned are tax-free as well. However, a lock-in period of 15 years applies to the investment, during which you cannot make any withdrawals. The scheme does allow partial withdrawals during the lock-in period in exceptional circumstances, such as a medical emergency. An individual can only hold one PPF account, and the scheme is open solely to Indian citizens,” mentions financial express.
In the case of PPF, “the capital investment, interest earned, and the final returns received upon maturity are all exempt from taxes. You can start a PPF investment with a minimum yearly deposit of Rs 500. The maximum yearly investment is capped at Rs 1.5 lakh. Your account may become inactive if you fail to make the minimum investment in a year,” further mentions.
PPF Interest Rate Vs FD
The interest rate on Public Provident Fund is revised on a quarterly basis by The Union Government and is currently fixed at 7.1 per cent, that compound annually.
If you fall under the category of 30% tax slab, then going for the PPF investment method will be the ideal one for you, in comparison to FDs. “Most banks currently offer rates ranging between 6.5% and 7% on long-term deposits. However, the interest yielded by such deposits is taxed based on the slab rate applicable to you. Thus, post-taxation, the final interest you get hovers around 4.55% to 4.90% per annum.”
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How Much Should Invest In Public Provident Fund?
“Your investment in PPF must be in sync with your financial goals. If you are clear about your goals, you can quickly answer how much you should save in your PPF account. Suppose you need Rs 25 lakh in 15 years for your children’s education. So, if you save Rs 1 lakh annually and if we calculate at the current interest rate of 7.1%, then your total amount at maturity after 15 years would be Rs 27,12,139. Depending on your requirement, you can allocate your funds to the PPF. The interest rate in the PPF scheme is decided by the Central government and is declared quarterly,” mentions financial express.
