Public Provident Fund (PPF Budget 2022 Expectation): Investors and tax experts are hoping that Budget 2022 will pave the way for an increase in the maximum deposit limit prescribed under Public Provident Fund Scheme. At present, an individual is allowed to invest up to Rs 1.5 lakh per year in the PPF account. This deposit qualifies for tax deduction under Section 80C of the Income Tax Act.
Experts are hoping for an upward revision in the PPF yearly deposit limit to Rs 3 lakh in the upcoming Budget. They have also called for an increase in the Section 80C deposit limit to Rs 3 lakh.
The present deposit limit of Rs 1.5 lakh/year has not been revised since 2014. Hence, experts believe it requires reconsideration.
According to the Institute of Chartered Accountants of India (ICAI), the PPF deposit limit raise is necessary in present times because it is the only safe and tax-efficient savings scheme available for self-employed assessees.
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While salaried employees have the option to invest in various provident fund schemes, non-salaried and self-employed have only PPF as a long-term investment scheme that guarantees a tax-free return.
“The only safe and tax-efficient option available for self-employed assessees is PPF. Hence, the suggestion to increase the ceiling of PPF contribution to Rs 3 lakhs,” ICAI said in its pre-budget memorandum.
What if PPF deposit limit is raised to Rs 3 lakh?
Assuming the current rate of 7.1% interest on PPF deposit, individuals can get around Rs 40 lakh in 15 years. Investors are allowed to extend their PPF account in blocks of 5 years each after the mandatory 15 years maturity period.
If the deposit limit is raised to Rs 3,00,000/year, then investors may get over Rs 80 lakh from PPF after 15 years. However, to make this happen, a lot of regulatory changes, including in the Income Tax rules, would be required to be introduced.
It remains to be seen whether the upcoming Budget will fulfil this long-standing demand of PPF investors and tax experts.
“Considering inflation and need for social security for people when they are aged, the limit may be increased further as deemed suitable. This limit of Rs.1.50 lacs was set in 2014 (it was increased from Rs.1 lac to Rs.1.50 lacs in 2014) and considering inflation and need for social security for people when they are aged, the limit may be increased to further,” ICAI said.