PPF account benefits: Income Tax rebate, higher interest rates and more - What smart investors, tax savers should know

Jan 20, 2019, 14:29 PM IST
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PPF benefits: PPF stands for Public Provident Fund and is one of the few investment plans that offer a EEE (Exempt, Exempt, Exempt) status. It is one of the most trusted long-term investment options. Today, if you are keen on a safe investment, a decent rate of return, tax benefits (deduction and tax-free interest) and have a long term investment horizon, then the PPF is meant for you. It is a disciplined investment avenue as your money is blocked for 15 years. Pankaj Mathpal, MD, Optima Money Manager, told Zee Business online, "If the investors are eyeing secured long term returns, PPF can be a good option as compared to various other schemes in the 'market."  A PPF account can be opened with a number of banks in the market, however not every bank and branch provides the facility of PPF accounts. One can easily get a list on the bank's website or details at the respective branch. However, Financial planner, Poonam Rungta believes that cashless India and lesser returns in government saving schemes have opened various other options like equity, mutual funds, bonds etc for middle-class investors.

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1. Risk-free Interest rate:

1. Risk-free Interest rate:

An attractive interest rate of 8% (as of now) with a scheme backed by the Central Government. PPF account provides better returns than fixed deposits, savings accounts and many other schemes, which makes it one of the best investment options available. Photo: PTI

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2. Compounded interest rate

2. Compounded interest rate

The interest rate on PPF compounds annually. Interest is paid on the 31st of March every year. The compounding interest is beneficial as the funds remain locked for 15 years, which helps in gaining interest even on interest received.  Photo: PTI

 

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3. Tax Deduction

3. Tax Deduction

Deductions under section 80C of up to Rs 1.5 lacs on investment in the PPF account makes it even better as the consumer saves his\her annual tax. Photo: PTI

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4. Good long-term investment of 15 years

4. Good long-term investment of 15 years

15 years locking period helps you remain invested for a longer duration, which proves beneficial for the investor due to compounding interest facility. Photo: Pixabay

 

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5. Loans against PPF balance

5. Loans against PPF balance

The consumers also have an option of availing loans against their PPF balance, between 3rd to the 6th financial year. This feature lets you utilise your PPF balance as collateral while taking a loan, without disturbing or withdrawing anything. Photo: PTI

 

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6. Low Investment token

6. Low Investment token

Not every person or investor is financially equal, therefore PPF provides a facility of the minimum deposit of Rs 500. Deposit Amount in a PPF account ranges from a minimum of Rs.500 to a maximum Rs.1,50,000 in one financial year. Photo: Pixabay

 

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7. Extension of a PPF account

7. Extension of a PPF account

An investor also has an option to extend the maturity period beyond 15 years. PPF account can be extended in a block period of 5 years after maturity. Photo: Pixabay

 

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8. Withdrawal Facility

8. Withdrawal Facility

Blocking facility for 15 years does not mean, an investor cannot withdraw his\her money in case of an emergency. However, the partial withdrawal facility can be availed only from 7th financial year onward. Photo: PTI

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