PPF: Know these 7 important things before investing, will get more Profit

HIGHLIGHTS: PPF is a popular and quite old method of saving in India. PPF is one of the small savings schemes.


Public provident fund i.e. PPF is a popular and quite old method of saving in India. PPF is one of the small savings schemes. Explain that the government has not made any change in the interest rate of small savings schemes for the July-September quarter. That is, they will continue to get interest as much as the previous quarter.

Public Provident Fund (PPF) is among those instruments of fixed income that have the highest interest. There is a better investment option for the long term. Investing in it is not only safe, but it offers many benefits in tax exemption and there is no risk. So let's give you all the important information related to PPF.


No Fixed Interest Rate 

The interest rate offered on PPF is not fixed but it is linked to government bonds with maturity period of 10 years. Its interest rate does not change daily but is fixed at the beginning of every quarter. It is fixed based on the average bond yield of the last three months. Let it be said that it has steadily declined since the quarter of April-June 2019 and now it has come down to 7.1 percent.

Tenure can be extended

PPF account becomes mature in 15 years. When the account is matured, you have the option to withdraw the entire balance and close the account, or you can extend the account for 5 years with or without the contract. How many times such an extension can be done in a five-year block. That is, there is no limit to it.

Adequate liquidity available 

While a 15-year tenure does not mean that your capital is stuck for a long time. The period of 15 years is from the day you opened your account and the lock-in period gradually decreases. In the 14th year it remains only one year. If you opened a PPF account in 2006, the lock-in would end next year.

Interest is calculated before 5th of every month

Compound interest is available annually on PPF. However, its calculation occurs every month. This interest is paid on the minimum balance between the 5th and the last date of every month. If you invest before the 5th, you will get interest for that month on the investment. Otherwise it will be like one month interest free loan for the government. So if you are investing by check, then deposit the check 3-4 days before the cut off date. If your bank shows slowness in crediting it to your PPF account then you will not get that month's interest on that investment.

In case of Emergency

After 6 years, you can withdraw 50% of the balance at the end of the four-year period or the previous year, whichever we are. If the account is not opened for six years, then you can take a loan from three years to six years. The loan amount can be up to 25% of the balance at the end of last year. It takes only 1 per cent interest annually and has to be repaid in three years. Until one loan is repaid, the investor cannot take another loan.

Tax Benefits

Income tax exemption on the amount up to Rs 1.5 lakh under Section 80C on contribution in PPF. Interest on this is not taxed, but it is important to give this information while filing tax return. Withdrawals from PPF are not taxed and this does not affect the tax liability of the taxpayer. There is no tax on the amount received on maturity.

Source: Web