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What is a public provident fund?
Safety…Safety…Safety…your money is safe. Dreaded taxes don’t
eat into your returns.
Yes…This is
the public provident fund popularly called the PPF.
What is a public provident fund?
You invest your money in a PPF. You get interest on the money
you invest in the public provident fund. On maturity of the PPF you get your
principal (money you have invested) back along with interest. You can make up
to 12 transactions a year.
Minimum amount: You can invest a minimum amount of
INR 500 in a year in a PPF.
Maximum amount: You can invest a maximum amount of
INR 1.5 Lakhs in a year in a PPF.
Lock in: The PPF has a lock in period of 15
years. You can extend your PPF in blocks of 5 years with or without making a
further contribution.
If you continue your PPF after 15 years without making any
contributions you can withdraw any amount from this account subject to a single
withdrawal a year.
If you continue your PPF after 15 years and you make
contributions (invest money into the PPF) then you can withdraw up to 60% of
the amount in the PPF account at the beginning of the 5 year block.
How much of interest
can you get from the PPF?
The interest on the PPF is calculated on the lowest balance
between the 5th and the last day of the month. The interest rate
payable by the PPF is linked to the Government securities rate.
For the FY 13 (April 1st 2012-March 31st
2013) interest rate is 8.8% a year .For the FY 14 (April 1st
2013-March 31st 2014) and FY 15 (April 1st 2014-March 31st
2015) interest rate is 8.7% a year.
Yes PPF enjoys EEE
exemptions:
“EEE” means exempt exempt exempt. The PPF enjoys a deduction under Section 80
C of the income tax act up to INR 1.5 Lakhs a year. You can invest a maximum
amount of INR 1.5 Lakhs a year in a PPF and avail a deduction under Section 80
C of the income tax act on the full amount invested.
The money accumulates with time (increases as you get
interest on this amount over 15 years) and no tax is charged on this amount. The
money you withdraw on maturity is tax free.
PPF has a new name. Riskless and taxless.
Can you avail a loan
against your PPF?
You can take a loan against your PPF from the third year to
the sixth year of your PPF.
Know your goals:
You need to remember that a lock in of 15 years makes PPF an
investment for the long term. It also means less liquidity. You cannot withdraw
your money easily from the PPF.
PPF is a dream investment for conservative investors who take
less risks and want their principal (money invested) to be safe along with
interest.
You can invest in a PPF if your financial goals are
retirement and money for your children’s education.
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