Public Provident Fund is the only instrument which is quite different as compared to other instruments. This is such an instrument, where not only money is safe but also gets a good return. So let’s study about the PPF and its benefits which make it different from other investment products.
WHAT IS PPF?
The full form of PPF is Public Provident Fund. This scheme is established by Government of India in 1968. Its purpose was that the employees of the unorganized sector, who do not have the facility of EPF, Pension etc., should also get a chance to save money for their future. The scheme is run by government and gives the same interest. But operation of PPF is done through post office or banks. PPF is also a tax saving scheme.
Some important information about PPF:-
- The maturity period of PPF is 15 years after which you can withdraw your money.
- Investor can take loan and partially withdraw up to 50% at the end of fourth year.
- The minimum investment in PPF is Rs.500 and maximum is Rs.1.5 lakh.
- Up to 1.5 lakh investment, section 80C benefits are also available.
- Interest rate is 7.1 % (current quarter).
BENEFITS OF PPF
1. EXEMPTED FROM INCOME TAX:-Income tax exemption is also available on investment in Public Provident Fund. Section 80C of the Income Tax Act provides a maximum exemption of up to Rs 1.5 lakh on PPF investment. The most important thing about PPF is that the interest earned in the scheme and the money received on maturity is completely tax free.
2. GOOD RETURN:- PPF is started by government for common people where they get 7.1 % rate of interest on their investment. The interest rate is fixed on quarterly basis. Now days return on fixed deposit also falls, so this reason also makes the PPF different from others investment. Even, the return on fixed deposit is not exempted from tax, but in PPF, return is exempted.
3. BENEFIT OF GETTING LOAN AGAINST PPF:-You can also take a loan from the bank or post office on the amount available in your PPF account. There are many benefits of taking a loan from this account:-
- The interest rate of loan taken from PPF account is very low. You just have to pay 1% more interest than the interest rate of PPF
- After opening a PPF account, the facility of taking a loan starts from the third year.
- You do not have to mortgage anything to take a loan from PPF account
No doubt interest rate for this loan is low. But you can get only 20% on the available amount in PPF.
4. GOVERNMENT SECURITY:-PPF is managed by the central government and the government itself decides interest rate. Therefore, there is a complete guarantee of safety on investment in the scheme. If you are looking for investment with tax exemption and good returns, then investing in PPF is the best.
5. THE MORE TIME YOU GIVE,THE BIGGER THE FUND WILL READY:- Your regular investment helps you to build a large collection. For example, if someone has invested 1 lakh rupees every year in PPF account, then in 15 years your investment will be 15 lakh rupees. 12,12,139 will be earned from interest on this. Meaning, by investing in the scheme, you will have a total deposit of Rs 27 lakh 12 thousand 139. Thus, the more time you give, the bigger the fund will be ready for withdrawal.