Public Provident Fund is the schemes started by the central government from 1968 for the welfare of the people of India. As this scheme was launched for the benefit of people who made investment by very small amount and they will get more amount at the maturity. Since this scheme was backed by Central government, there is no risk of loss of money & returns are guaranteed.
PPF is a long term investment having the maturity period of 15 of years from the date of opening the account. We can withdraw partial amount after 5 years from the date of opening the account in case of necessities.
Interest on PPF balance is calculated every month and the amount is credited to the PPF account at the end of every financial year. PPF investors are advised to make contributions to their PPF account before the 5th of each month. Interest is calculated from the 5th of that month till the end of that month on the lowest PPF balance amount. Hence it is always advisable to start PPF account at the start of financial year.
If money has not been invested in PPF account in any year then PPF account may be deactivated from that year. To reactivate your PPF account we have to pay penalty of Rs 50 per year till the year of activation of account.
We can open PPF account either in post office or in authorised banks only. Now a day we can open PPF account by online banking also.
Benefits of investing in Public Provident Fund
- We can invest as low as Rs 500 in a year in PPF and the maximum amount of Investment could be Rs 1,50,000. So lower middle class family will get benefit from this scheme.
- The money invested in PPF in a financial year gets exempted from an individual’s taxable income under section 80C of the income tax act 1961. And the interest earned on PPF deposits along with the accumulated amount of Principal amount doesn’t have any tax liability when it’s get matured.
- We can also get loan from PPF account from the 3rd financial year up to the 6th financial year from the date of opening the account. A second loan can be obtained only after the closure of the first loan.
- A PPF account after the maturity of 15 years can be extended in the blocks of 5 years. We can withdraw 60% amount from the PPF account if we need then and balance amount can be extended for the block of 5 years.
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