The unpredictability of the market makes many people anxious about the security of their investments and the returns they will offer. Since it is common that most people prefer high returns with the lowest risk possible, one of the alternatives available for such individuals is to take a look at PPF. Public Provident Fund commonly known as PPF is one of the safest options of tax saving investment in India.
It is a long-term investment facility provided by the Government of India, which also pays the interest amount as it varies in every quarter. Any citizen of India is eligible to open a PPF account for themselves. Since it is offered by the Indian government and is not subjected to the volatility of the market, the risk associated with the PPF account is next to nothing. As the interests keep accruing throughout the tenure (which is usually 15 years) and there are no tax deductions, even on the maturity of the account, an investor is sure to expect a high and stable return on his investment.
With the help of a PPF calculator, you can learn about the interest amount earned on your investment and what the matured value at the end of your investment tenure would look like.
After this, several questions regarding the status of PPF come to mind. It is important to go through the important ones, at least, before you can make a firm decision about opting for a PPF account.
What Is The Eligibility Criteria Of Opening A PPF Account?
Any Indian citizen is eligible to open a PPF account. An individual is entitled to keep only one PPF account to himself unless he is looking after a minor’s account. A Non-Resident Indian is not entitled to open a PPF account. In the case of an individual who has become an NRI after having started a PPF account, he can continue with it until its period of maturity.
How To Open A PPF Account?
One can open a PPF account with nationalized banks along with other major banks such as Axis Banks, ICICI Bank, HDFC Bank, etc., and post offices. The account can be opened through the online medium as well. You will have to fill an application form along with which relevant documents stating your address proof, identity proof and income proof would also need to be submitted.
A PPF account can be easily opened online. SOURCE: Pixabay
What Is The Minimum and Maximum Amount One Can Deposit In A PPF Account?
The minimum amount one can deposit is Rs. 500 while the maximum amount is Rs. 1.5 lakh each year. If there is a minor account along with a regular PPF account, the maximum amount would still remain the same i.e. Rs. 1.5 Lakh. It is also to be noted that the minimum of Rs. 500 has to be deposited every year into the account for the scheme to be running.
In the case that one deposits more than the maximum amount of Rs. 1.5 lakh, neither any interest will be provided on this surplus nor there will be any tax exemption on the said amount. It will be refunded to you after the maturity period without any interest.
What Happens If You Close The Account Prematurely?
A PPF account can be closed prematurely provided that the amount is being withdrawn only after having completed 5 years since the date the account was opened. Only on very limited conditions, you can be allowed to close the account prematurely. These cases include the investor undergoing serious illness himself or that his spouse, parents or children are. Also, premature closure can happen only with due documents of medical reports. Another reason that can be given for a premature closure can be requiring funds for higher education.
What Are The Conditions Associated With A Minor Account?
Only parents are eligible for opening a PPF minor account on behalf of their child. Both the parents, however, cannot individually open two separate accounts for the same child. In the case of both the parents being dead, the legal guardian is entitled to open a PPF account for the child.
What Is A PPF Calculator?
A PPF calculator is a simple but effective online calculator in which you can know about the interests you will be earning by inserting your principal amount and the interest rate on it. In the same way, you can also ascertain the maturity amount you will be given provided that you add the tenure of your investment in the calculator.
A PPF calculator saves your time by calculating your returns. SOURCE: scripbox.com
There are many online PPF calculators, such as Scripbox’s PPF calculator which can come off very handy to you to do your investment mathematics.
What Are The Benefits Of A PPF Account?
There are several benefits associated with a PPF account. Some of them are as follows:
● Interest Benefits
As a PPF account is maintained and regulated by the Government of India, it offers stability which simply cannot be provided in the free market. Historically, the average rate of interest in PPF has been around 7% to 8%. In the last months, it has been around 7.1%
|Quarter||Rate of Interest (%)|
|April – June 2020||7.1|
|January – March 2020||7.9|
|October – December 2019||7.9|
|July – September 2019||7.9|
|April – June 2019||8.0|
|January – March 2019||8.0|
● Tax Benefits
80C of the IT Act, 1961 provides tax benefits to a PPF account. Following an Exempt-Exempt-Exempt (EEE), a PPF account is subjected to no tax deduction either on the interest amount earned over the years or on the final maturity amount.
With the aid of a PPF account, you can also avail a loan for yourself. The maximum loan amount can only be 25% or less of the account balance. You will be given around 36 months or 3 years to pay back the loan.
● Tenure Extension
You are free to withdraw the amount once the tenure of 15 years is over. However, you are also eligible to add a 5 years extension to your PPF account with the benefits being the same as it has been in these 15 years.
A PPF account, therefore, comes with numerous benefits that attract many investors. Moreover, since the risks involved with it are nothing substantial, investors are tempted to opt for it to gain a steady and high return on their investments. They can be reassured about the high yield on their investments and know the same with the help of a PPF calculator. As a long-term investment plan, PPF provides you with the perfect alternative of the stock market with a return which is more than guaranteed.