What is PPF?? Things to know about PPF

The Public Provident Fund (PPF) is one of the most popular tax-saving schemes, which can be opened in a post office or designated bank branches. But do we know all about PPF??

Here are the things you should know about PPF:-

1.       Where to Open PPF Account?

PPF Account can be opened in post office or in selected bank branches. Documents need to be submitted for opening a PPF account.

2.       How much is the Interest Rate?

The interest rate offered on the PPF is no longer fixed, but linked to the market. This does not mean that the rate will change on a day-to-day basis. It will be announced every year in April, based on the average bond yield in the previous year. For the current financial year, it is 8.8%.

3.       How does the Interest accrue?

The interest on your PPF balance is compounded annually, but the calculation is done every month. The interest is calculated on the lowest balance between the fifth and last day of every month.

If your contribution to PPF account is credited on or before 5^th of that month, then that contribution will bear interest for that month too. If it credited after 5^th of the month, you will get interest only from the subsequent month.

4.       What is the minimum and maximum investment?

The investment limit is Rs 1 lakh in a year through a maximum of 12 instalments. If your minor child has a PPF account, the combined limit for both accounts will be Rs 1 lakh. Don't invest more than the Rs 1 lakh in a year, because if it is discovered, any interest earned by the excess amount will be reversed. There is also a minimum investment required. An investor has to put in at least Rs 500 in his PPF account in a year.

5.       What are the Tax benefits?

The investment is eligible for tax deduction under Section 80C. The interest earned is also tax-free, and so are withdrawals.

6.       When does it mature?

A PPF account matures in 15 years, but you can extend the tenure in blocks of five years after maturity. The balance continues to earn interest at the normal rate. The minimum investment of Rs 500 has to be maintained even for accounts extended beyond 15 years.

7.       What happens if PPF account holder dies?

On the death of a subscriber, the balance in the PPF account is paid on demand to his nominee or successor. However, the balance, if not withdrawn, continues to earn tax-free interest. The nominee or legal heir is not allowed to continue the PPF account by making fresh contributions to it.

This Article has been Shared by Student of ICAI Palak Aggarwal. She can be reached at aggarwal.palak2809@gmail.com

Tags: what is PPF, Things to Know About PPF, Public Provident Fund,

Get Sudycafe's Updates by SMS in your mobile by Following below two Steps: 

1. Download our SmartPhone Application & 

2. Send a SMS, Type: JOIN CASTUDYCAFE & send to 9219592195

Subscribe to Studycafe by Email