A part of employees’ salary is transferred to Employee Provident Fund ( EPF) as an initiative by the Government of India to create retirement corpus for the salaried class. However, if you are self-employed and want to create a snowball of money for your financial independence then, Public Provident Fund (PPF) can be an answer to money-anxiety. PPF is through a voluntary contribution and it has a lock-in period of 15 years. At present, interest rate in PPF is 7.6%, experts advocates investing in PPF as it builds a tax-free retirement corpus. An account holder can deposit a maximum of Rs 1.5 lacs in the PPF account. An amount in excess of Rs 1.5 lacs in a financial year won’t earn any interest.
PF is applicable for salaried employees where a fixed amount is deducted from salary and taken as contribution towards PF. It continues till retirement or till whenever the employee is employed. Even though PF and PPF offer a similar structure, PPF is done with a choice known as voluntary contribution fund i.e. VCF.
If you already have a Provident fund account then there is no need to start a new investment account in PPF. However, one should open a PPF account and deposit a minimum sum of Rs. 500 to keep the account activated. This account can come handy if you are planning to leave employment or divert an extra fund of a family member to avail the tax-free ceiling of Rs. 1.5 lacs under section 80C of the income tax act.
Another advantage of opening a an account of public provident fund(PPF) immediately is that the lock in period reduces over time. After a lock-in-period of 15 years, the renewals are done in blocks of 5 years each which affords you access to funds and liquidity. Hence, both self-employed and salary earning people shall consider PPF
You can do it directly through a post office or a bank. It can be opened online with few banks. Some banks offers this facility if you already have an account with them. One can also transfer account from a post office to a bank and vice-versa.
Step 1: A PPF account can be opened at designated banks like State Bank of India, ICICI Bank, PNB etc. Find out the list of designated bank branches at the bank website or at a bank branch itself. The form is available at the Indian Post portal if you wish to open it from a post office.
Step 2: Submit the required documents:
you are recommended to carry attested original document.The bank will issue a PPF passbook. The transactions in your PPF account are updated in this passbook. You can use the passbook to claim tax deduction under section 80C of IT act.