New Delhi: National Pension System (NPS) and Provident Public Fund (PPF) are very popular long-term investment schemes amongst the masses and are controlled by the central government.
PPF interest rate, tax benefits
Any single adult who is a resident of India or a guardian on behalf of a minor/person of unsound mind can open a PPF account with designated banks and other financial institutions with a minimum deposit of Rs 500 per annum and a maximum deposit of Rs 1,50,000 in a financial year.
The government has set the interest at 7.1 per cent per annum (compounded yearly) with effect from January 1, 2024. The deposits in PPF qualify for deduction under Section 80C of Income Tax Act. The interest earned on PPF deposits is exempt from Income Tax. Interest is credited to the account at the end of each financial year and it is calculated for the calendar month on the lowest balance in the account between the close of the fifth day and the end of the month.
A PPF account holder is eligible to apply for a loan from 3rd financial year upto 6th financial year. The subscriber is eligible for one withdrawal during a financial year after five years excluding year of account opening.
A PPF account will mature after 15 financial years excluding FY of account opening. In case of untimely death, interest shall be paid till the end of the preceding month in which the account is closed.
National Pension System (NPS)
The National Pension System (NPS) is aimed to provide social security to all citizens of India. NPS does not offer any fixed returns as the returns under NPS are market-linked. It is administered and regulated by PFRDA. THE NPS accounts are eligible for tax deduction up to 10 per cent of salary (basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs 1.50 lacs under Sec 80 CCE.
The employee is eligible for tax deduction up to 10 per cent of salary (Basic + DA) contributed by employer under Sec 80 CCD(2) over and above the limit of Rs 1.50 lacs provided under Sec 80 CCE.
The NPS was made available to every Indian Citizen from May 1, 2009 on a voluntary basis.
NPS Account types
Tier -I Account
The NPS applicant will have to contribute savings for retirement and there are restrictions on withdrawal from accounts. It is focused on retirement and applicant can claim tax benefits against the contributions made subject to the Income Tax rules in force.
Tier-II Account
This allows the NPS account a voluntary savings facility and the individual is eligible to withdraw his/her savings from this account whenever he/she wishes. Applicants can’t claim any tax benefits against contributions to this account.
National Pension System (NPS) and Provident Public Fund (PPF) are one of the very popular saving schemes in India. Currently PPF is offering 7.1 per cent interest in a financial year Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
