The Public Provident Fund or PPF was launched in 1968. In a sense it provided an alternative to the Employees’ Provident Fund, the benefit of which was (and still is) available only to those who have a job in an organisation that employs 20 or more persons anywhere in this country.
Money keeps multiplying
Some ask what will happen to the money in PPF account once the lock-in period of 15 years expires and the investor neither withdraws the money from the account nor extends it. The redeeming feature is that the money keeps on multiplying and the government does not interfere with the account at all.
Extended automatically
If the investor doesn’t withdraw or close the PPF account after maturity, it is extended automatically without the account holder applying for it. Interest will continue to be accrued to the PPF account on the balance of the preceding year. You can extend the account with or without contributions.
Continuing investments prudent
However, all investment strategists advise that an investor should extend the PPF account beyond 15 years and continue the investments. One can invest a minimum of Rs 500 in a PPF account every year and a maximum of Rs 1.5 lakh.
Income tax benefits
PPF currently offers 7.1% interest, which is one of the higher rates available among the debt instruments. If someone keeps investing into the PPF account, the money keeps multiplying. Moreover, it offers tax exemption on all three fronts – the principal, the interest component and the final maturity amount. Therefore, it is said to be in the exempt-exempt-exempt category. Therefore, one not only earns from interest on fresh investments but also saves tax (if he/she is in the old tax regime) according to Section 80C of the Income Tax Act 1961.
PPF for kids
In fact, the government encourages people to start a PPF account for their kids. According to the rules, one can open a PPF account just after birth and keep investing in it. The ceiling is the same amount of Rs 1.5 lakh a year and the parent/legal guardian can get income tax deductions on it. However, the account has to be transferred to the account holder as soon as he/she becomes an adult.
Public Provident Fund is trusted by generations of Indians for long-term building of a pool of funds and easy-to-follow rules. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
