Do you suggest Public Provident Fund a good option for investment tax saving purpose?

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What is your suggestion on - Is Public Provident Fund is good option for investment for tax saving purposes? Is there any eligibility criteria on getting PPF?

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Here are some of the good reasons why you should invest in PPF:

  1. High interest rates: Interest rates have fallen a great deal in the last two years and it is extremely difficult to find investments that offer inflation-beating decent returns. Public Provident Fund is one of the oldest schemes and the interest rate on the PPF is currently 7.1 per cent which is higher than 6.8% offered on other small savings schemes like the National Savings Certificate (NSC) and 6.7% offered on Post Office 5-year Time Deposit.

  2. Power of compounding: If you have time on your side, the power of compounding can do wonders for your investment. With a lock-in period 15 years, PPF allows your investments to grow over time. The maximum amount of investment through the PPF is Rs 1.5 lakh every financial year.

  3. Tax-free interest income: PPF offer exempt-exempt-exempt (EEE) tax benefit which means that interest earned on the Public Provident Fund is tax-free.

  4. Tax benefits under Section 80C: Apart from the interest income being tax-free, PPF also offers other tax benefits under Section 80C of the Income Tax Act.

  5. Loan facility: PPF also provides loan and partial withdrawal benefits, which can take care of your emergency requirement to some extent. PPF account holders can avail a loan between the third and sixth financial year of opening the PPF account.

  6. Partial withdrawal: After the completion of the sixth financial year or from the beginning of the seventh financial year, the PPF account holder becomes tax-free partial withdrawals.

Apart from a Non-residential Indian (NRI), everyone is eligible to open a PPF account. There are some conditions, though. A single person can have only one PPF account in his or her name, and it will have a locking period of 15 years. There is the provision of shifting the account from one type to another by contacting the respective branch. Joint accounts cannot be made, even if two people belong to the same family.

Opening a PPF account has no age limit, and even a non-salaried person with a business can benefit from it. A PPF account can be created from a bank or a post office, with the provision of an online account being available these days.

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