New Delhi: PPF account opening is an important avenue for investment by salaried individuals. While the PPF rate of interest is fixed and conservative compared to equity market returns, it is sought after owing to the tax benefits on offer, especially for salaried individuals.
How to open PPF account
For PPF account opening, you must be eligible on the following counts:
You must be an Indian resident
You must open only one PPF account
You may open the account in the name of a minor
Hindu Undivided Families may not open a PPF account after May 13, 2005
Documents needed to open a PPF account
You can visit any bank or post office
You can also open a PPF account with your current bank through netbanking
To open a PPF account, you may submit the following documents as ID proof:
Aadhaar
PAN card
Driving license
Voter ID
Passport
For address proof, you may submit:
Aadhaar
Telephone bill
Electricity bill
Ration card
You must also submit 2 passport-size photos and a signed cheque. Minors may be required to submit a birth certificate for a PPF account.
PPF account tax benefits
If you are a salaried individual, you may open a PPF account for long-term savings and accrue deductions under the old tax regime of the Income Tax Act.
Under Section 80(C) of the I-T Act, taxpayers can invest up to Rs 1.50 lakh, which may be counted to reduce their tax payable.
Taxpayers must ensure that this amount is deposited by March 31, the closing date of every financial year.
The compound interest is accrued every year on March 31.
Other benefits of PPF include:
It is a fixed period scheme with 15 years lock in.
Investors may be allowed to withdraw prematurely under certain circumstances such as marriage, sickness or other circumstances as laid out under the governing rules and regulations.
Partial withdrawal is allowed after the 7th year.
Investors can secure loans against PPF between the 3rd and 6th year of investment.
Investors can put a minimum of Rs 500 in the account.
PPF may be extended after the mandatory 15 year period in blocks of 5 years.
PPF interest rate
PPF interest rates is revised on a quarterly basis by the finance ministry.
Currently, the PPF interest rate is 7.1 per cent since Q1FY21.
PPF interest rate was cut from 7.9 per cent in Q2FY20 in Q1FY21.
In Q4FY19, the PPF interest rate was hiked to 8 per cent from 7.8 per cent in the previous quarter.
PPF calculator
Here’s how much you will earn if you invest Rs 12,500 per month for 15 years at the current PPF interest rate.
If you invest Ra 1,50,000 per year for 15 years, your principal will stand at Rs 22,50,000. At the current rate of interest, the return will be Rs 18,18,209, taking the total maturity value of Rs 40,68,209.
PPF investment offers fixed returns and tax benefits. Know how to open a PPF account, documents required and potential returns. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
