Everything About PPF And Its Tax Benefits

The Public Provident Fund is one of the most opted investment schemes in India. By opening a PPF account, you get several long-term advantages with nominal risks. This government-backed scheme allows their investors to open such an account with a minimum deposit of ₹100 in a year. Here you will get a detailed idea about PPF tax benefits and other associated factors that you need to know. 

What Are the Features of a PPF Account?

A PPF account comes with a varied array of features as mentioned below:

• Term

You can open a PPF account with a minimum term of 15 years. Following the tenure, you can extend your account in blocks of 5 years. This tenure extension can be done with or without any extra contribution. This way, it allows the investors to enjoy the benefit for 25 years, 30 years, and so on.

• Minimum & Maximum Limits

An individual can start investing with a minimum deposit of ₹100 per financial year. Whereas, the maximum limit of investing annually is up to ₹1,50,000. At your convenience, you can either choose to invest a lump sum amount or a maximum of 12 instalments. However, you must note that an annual investment of more than ₹1,50,000 will not earn any interest. 

• Frequency Of Depositing

You have to make a yearly deposit of ₹500 (minimum) for consecutive 15 years to keep your public provident fund active. An individual can deposit by any mode of payment such as cheque, cash, online fund transfer, and DD (Demand Draft).

• Nominee 

You can easily avail the nomination facility by designating someone as your PPF account's nominee. You must know that a PPF account can be only opened in the name of one individual. A joint account opening facility is not offered in the case of PPF accounts. 

• Risk-Free

As the public provident fund is backed up by the Government of India, thus you will get guaranteed returns along with the capital. In addition, PPF offers a fixed interest rate which can be used to diversify your investment portfolio.

What Are the PPF Tax Benefits?

Several investors choose Public Provident Funds, intending to avail tax benefits. PPF falls under the EEE (Exemption- Exemption- Exemption) category thus all deposits made by investors in their account are tax-deductible u/s 80C of the IT Act. 

You must note that the maximum deposit amount must not exceed the threshold of ₹1,50,000 annually. Besides, the interest and accumulated amount gets exempted from tax at the time of your withdrawal. Now that you know how to claim deductions on PPF investments, let us move on to how to open this account. 

How to Open a Public Provident Fund Account?

One can open a Public Provident Fund account, via both offline and online modes. In the below section, you will get an in-depth step-by-step guideline on how you can easily open a PPF account online.

Step 1: Visit the net or mobile banking portal of your respective bank. 

Step 2: Surf through the home screen and click on the ‘Open a PPF account’ option.

Step 3: Click on the 'Self Account' option. In case of a minor account, you can click on the 'Minor Account’ option.

Step 4: Provide all the relevant information in the application form. 

Step 5: Enter the amount you want to deposit annually in your PPF account.  

Step 6: Carefully check the duly filled application form and submit it. 

Step 7: Enter the OTP sent to your registered phone number. 

Afterwards, your account will be created instantly and the PPF number will reflect on the screen. 

Alternatively, you can also choose to open a PPF account offline by visiting a post office or authorised bank and consulting a representative there. 

How to Use a PPF Calculator?

PPF calculators come with an easy-to-use interface, enabling you to monitor the growth of your capital accumulated in the account. While manual calculations keep a scope of human errors, one must rather choose to use this tool. Below are the steps on how to use an online Public Provident Fund calculator.

Step 1: Search online for a PPF calculator. 

Step 2: After opening the tool, enter the yearly investment amount. 

Step 3: Use the slider to set the PPF tenure (in years).

By performing these 3 above-mentioned steps, you will get the results within a few seconds. Other than the maturity value and interest amount, you will get the total invested amount.

The Bottom Line

Before you open a Public Provident Fund account, you need to be aware of the PPF tax benefits that you can avail through this instrument. This tax-saving investment option is ideal for individuals looking for low-risk investment. With a comprehensive idea about the PPF scheme and its returns, you can make an informed decision and proceed with opening an account.

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