From investment protection to liquidity: Know some little known facts about PPF before investing

By: |
December 14, 2018 12:25 PM

The Public Provident Fund or PPF accounts are eligible for deductions u/s 80C and the interest earned as well as the maturity amount are also tax exempt.

Public Provident Fund, PPF, PPF accounts, tax benefits, income tax, 80C benefits, sovereign guarantee, investment protection, loan on PPF, partial withdrawals, minimum PPF investment, maximum PPF investmentsPPF is one of the most popular tax-saving investment plans because it comes under exempt-exempt-exempt (EEE) category.

The Public Provident Fund or PPF is one of the most popular tax-saving investment plans because it comes under exempt-exempt-exempt (EEE) category as the deposits in PPF accounts are eligible for deductions u/s 80C and the interest earned as well as the maturity amount are also tax exempt.

As the process of declaring tax-saving investments has started, you might be considering to make the investments before the last date of submitting the proof arrives. Apart from EEE benefits, here are some other attractive features of PPF that you should know before making the investments.

1. You can’t open PPF account for your spouse: Investments in PPF are allowed for earning individuals and minors through guardian. So, an earning individual may open a PPF account for self and/or for his or her child and not for his or her spouse.

2. You can’t deposit more than 12 times: The total amount a person may invest taking together the accounts for self and child is up to Rs 1,50,000 in a financial year through maximum 12 number of deposits.

3. You will not get any interest on excess deposits: If more than Rs 1,50,000 is deposited in a financial year, no interest will be payable on the excess amount. There will be no lock-in period on excess deposits, which may be withdrawn any time.

4. Your investment is secure and protected: PPF investments carry the sovereign guarantee of the Government of India and hence the principal invested and interests earned are fully secure. Moreover, PPF accounts have immunity and can’t be attached under any order or decree of a court in respect of any debt or liability. So, PPF investments are not only secure, but also completely protected.

5. You need not invest same amount every year: There are no obligation to deposit a fixed amount every year. To keep an account operative, a person may deposit as low as Rs 500 in a financial year.

6. You may extend your PPF tenure: The PPF accounts are opened for 15 years and after maturity, the tenure may be extended any number of times for a block of 5 years.

7. You may take loan on PPF: Loan facility is available to a PPF account holder from the third year of opening the account to the sixth year, when the account holder may take loan up to 25 per cent of the balance in the account at the end of the first financial year. The loan amount is repayable in 36 months and the rate of interest on loan is 2 per cent per annum.

8. You may make partial withdrawals: From seventh year onwards you may make partial withdrawals up to 50 per cent of the balance at the end of the fourth year or at the end of the preceding year, whichever is lower.

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