PPF Account Update: Investing in a Public Provident Fund account is one of the most popular forms of savings among all Indian citizens who look for a safe option that guarantees them steady returns. If one invests in this scheme in a disciplined manner, he or she can accumulate a lot of wealth at the time of maturity. PPF is also one of the very few investment options that enjoy the perks of the government’s triple tax exemptions, also known as the exempt-exempt-exempt (EEE) status. Beneficiaries get tax exemptions thrice, that is, during the time of investment, accrual, and withdrawal, under this rule.
As per the rules, one account holder can invest a maximum of Rs 1.5 lakh per year in his or her Public Provident Fund account, opened by the post office. This means that they can get income tax exemptions of up to Rs 1.5 lakh per annum. The deposit can be made on a monthly basis or annually, but cannot exceed the specified amount in one year.
How to Get Most Benefits from PPF Account?
To make the most use of your PPF account, it should be always kept in mind that the account must be opened between the 1st and 4th of any month, preferably April — and deposits must also be made between those dates. However, according to industry trends, it has been observed that salaried taxpayers open a PPF account towards the end of the financial year to save taxes.
For maximum gains, however, PPF accounts must be opened between April 1 and April 4, which will in turn ensure that the account holder gets the maximum interest amount in a financial year. If it is opened after April 4, the interest will be calculated from the next month, that is May.
The reason for this is simple. According to the rules of PPF, “The interest shall be calculated for the calendar month on the lowest balance in the account between the close of the fifth day and the end of the month.” This interest is credited to the PPF account at the end of each financial year, which is tax free under Income Tax Act.
PPF Interest Calculation
At present, PPF interest rates are one of the higher interest rates given by the government, after EPF. Public Provident Fund provides an interest rate of 7.1 per cent per annum, which is tax free. Public Provident Fund is flexible in nature in terms of investment as individuals can invest as low as Rs 500 per year into their accounts, and also as high as Rs 1,50,000 per year.
The interest is compounded annually and the corpus is paid on maturity after 15 years. Investors also have the option to extend their accounts for further block of five years and so on (within one year of maturity).
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