PPF Must Know Factor before Investment –Public Provident fund is judge as best investment option by investor of all categories. It is the best and secured way of wealth creation which can be done at minimum pain with practice of saving regularly and systematically in long term.
The public provident fund scores high on safety as government of India backed investment option with tax benefit under 80C. This is among the few investment option which has had the maturity amount tax free.
The Public Provident fund is having the option of loan on amount deposited with fewer terms and condition.
Find out Must Know factor about PPF Investment
Anyone can open PPF account with Minimum deposit of Rs 100 with nay of the Nationalized / Private or Schedule II banks in India and Post Offices Individuals may also open a PPF account on behalf of a minor child of whom they are the guardian.
A minimum deposit of Rs. 500 must be made during the financial year in order to keep the account active. The maximum that could be deposited is Rs. 1, 50,000 in a financial year.
The Deposits in PPF account could be in either one go, or in flexible installments preferably in multiple of 10. The number of Installment in a year also fixed as 12.
The process of Interest calculation in PPF account is little different than usual. The interest rate on Public Provident fund account is calculated on the lowest balance between the fifth and the last day of the month. Interest is compounded annually and credited on March 31 each year.
In practice the amount of Public Provident fund is in lock period for 15 years, however, the partial withdrawal may be permitted once a year, from the 7th year onward. Such withdrawals must not exceed 50 per cent of the balance at the end of the fourth year, or 50 per cent of the balance at the end of the immediate previous year, whichever is lower.
Premature closure of a Public Provident fund account is permissible only in case of death.
PPF deposit is considered as tax benefits under section 80C of Income Tax. Furthermore, the entire maturity amount including the interest is non-taxable.
PPF deposits are eligible for loan. Loans could be taken from the third year onwards till the sixth year.The maximum loan which can be granted is 25 per cent of the balance at the end of the 2nd immediately preceding year. The maximum tenure of loan would be 24 months. The rate of Interest on loan would be PPF Interest plus 2% variance.
A second loan could be availed as long as you are within the 3rd and the 6th year, and only if the first one is fully repaid.
The PPF account may be further extended after the end of regular tenor of 15 years. Such extension is permission in a block of five years. In such cases withdrawal up to 60 per cent of the balance at the beginning of each extended period (block of five years) is permitted.