PPF or Public Provident Fund is a scheme started by the National Savings Organization in 1968 with the objective of promoting small savings. Any resident Indian can open a PPF account. Only one PPF account is allowed to be opened per individual, and there can be no joint holders for this account.
The PPF account is one of the most popular investment alternatives that people enjoy in India today. This instrument has a 15-year lock-in period after which it can be renewed for 5 years at a time. But what makes the account so popular? Here are the top 5 reasons why one should open a PPF account:
1. Tax-free income:
The income earned on investments made in a PPF account is exempt from income tax. This makes it an attractive source to earn tax-free income. The interest is compounded for future years, and the interest earned on this compounded interest is also tax-exempt. This increases the returns from PPF.
2. Guaranteed income:
The PPF has a sovereign guarantee. What this means is that the Government backs the PPF. The returns on investment are guaranteed. This makes it a secure form of investment. Since minors can have their account, it is an excellent investment that parents can make for their children.
3. Tax break for investments:
Any investments made in Public Provident Fund get a deduction under Section 80C of the Income Tax Act. This makes it a lucrative investment option since it not only saves tax at the time of investment, but the income is tax exempt.
4. Flexible investment amounts:
While most investment modes have a fixed investment amount that should take place periodically, the PPF gives the investor the flexibility to make investments between Rs. 500 and Rs. 1,50,000 every year. These investments can be made any time during the year, up to 12 instalments. This flexibility means the investor can invest in this account any time he has the funds to invest.
5. Withdrawals:
The only major drawback about PPF is the liquidity. PPF accounts have a lock-in of 15 years from the year of account opening. For example, if you opened the account in July 2017, the account and the funds are locked in till March 2033. However, in spite of this lock-in, partial withdrawals can be made at any time subject to the terms and conditions. On maturity, the investor can choose to close the account and entirely withdraw his balance.
The PPF account is one of the most popular investment alternatives that people enjoy in India today. This instrument has a 15-year lock-in period after which it can be renewed for 5 years at a time. But what makes the account so popular? Here are the top 5 reasons why one should open a PPF account:
1. Tax-free income:
The income earned on investments made in a PPF account is exempt from income tax. This makes it an attractive source to earn tax-free income. The interest is compounded for future years, and the interest earned on this compounded interest is also tax-exempt. This increases the returns from PPF.
2. Guaranteed income:
The PPF has a sovereign guarantee. What this means is that the Government backs the PPF. The returns on investment are guaranteed. This makes it a secure form of investment. Since minors can have their account, it is an excellent investment that parents can make for their children.
3. Tax break for investments:
Any investments made in Public Provident Fund get a deduction under Section 80C of the Income Tax Act. This makes it a lucrative investment option since it not only saves tax at the time of investment, but the income is tax exempt.
4. Flexible investment amounts:
While most investment modes have a fixed investment amount that should take place periodically, the PPF gives the investor the flexibility to make investments between Rs. 500 and Rs. 1,50,000 every year. These investments can be made any time during the year, up to 12 instalments. This flexibility means the investor can invest in this account any time he has the funds to invest.
5. Withdrawals:
The only major drawback about PPF is the liquidity. PPF accounts have a lock-in of 15 years from the year of account opening. For example, if you opened the account in July 2017, the account and the funds are locked in till March 2033. However, in spite of this lock-in, partial withdrawals can be made at any time subject to the terms and conditions. On maturity, the investor can choose to close the account and entirely withdraw his balance.
No comments:
Post a Comment