What is PPF? How PPF is calculated?
The Public Provident Fund (PPF) was established in India in 1968 with the goal of organizing small deposits through investment and earning a return. It’s also known as a savings-cumulative-tax savings investment scheme since it allows you to create a retirement fund while lowering your annual taxes. A PPF account is a safe investment choice for anyone wishing to save taxes and earn assured profits.
About PPF
- Interest Rate: 7.1% per annum.
- Minimum Investment Amount: Rs.500
- Maximum Investment Amount: Rs 1.5 lakh per annum
- Tenure: 15 years
- Risk Profile: Risk-free returns
- Tax Benefit: Up to Rs.1.5 lakh under Section 80C
The Public Provident Fund (PPF) plan is a long-term investment option with a competitive rate of interest and returns on investment. The interest and returns earned are not taxable under the Income Tax Act.
Why PPF Account popular in India?
Because of its tax advantages and stability, the Public Provident Fund (PPF) has become a popular financial instrument for long-term saving. “PPF is one of the greatest savings schemes in India,” according to IDFC First Bank, “since it is a safe investment strategy that helps you in the long run.” A PPF account can be opened at a post office or a bank. The money invested is locked in for 15 years. You can only access a portion of the money in your PPF account after 6 years.
You can extend the length of your PPF investment for an additional five years after the 15-year period has elapsed because it is a long-term investment. When you invest, you get compounded interest on your total profits.
PPF’s Latest interest rate
The PPF interest rate is 7.1 percent per annum, compounded annually, for the quarter ending June 30, 2022. The Ministry of Finance will determine interest rates on a quarterly basis. Interest will be credited to the account at the conclusion of each financial year.
How is interest calculated on PPF?
For the calendar month, interest is calculated on the lowest balance in the account between the fifth and the last day of the month. At the end of each fiscal year, the account will be credited with interest. Interest is credited to the account each fiscal year, regardless of where the account stands at the end of the fiscal year.
What is the minimum and maximum investment amount in PPF?
The minimum deposit is Rs 500, while the maximum deposit is Rs 1.50 lakh every financial year. Deposits made in his or her own account as well as those made on behalf of minors are subject to the maximum limit of Rs 1.50 lakh. Individuals can deposit anywhere between Rs 50 and Rs 1.50 lakh in any number of instalments over the course of a financial year.
What are the Tax benefits of investing in PPF?
PPF’s appeal stems from the tax benefits it provides, as it falls under the EEE (exempt-exempt-exempt) tax classification. This means that the interest earned at the time of investment, as well as the cash received at maturity, are entirely tax-free or exempt. PPF contributions are also tax deductible under Section 80C.
Who is eligible to invest in PPF?
PPF can be invested in by any Indian citizen.
Unless the second account is in the name of a minor, a citizen can only have one PPF account.
PPF accounts are not available to NRIs or HUFs. If they already have a PPF account in their name, it will stay operational until the end of the year. However, unlike Indian nationals, these accounts cannot be extended for another 5 years.