Public Provident Fund (PPF) is a retirement planning-focused instrument, that was introduced by the National Savings Organization in the year 1968. PPF Account has a lock-in period of 15 years and it comes with an EEE (Exempt-Exempt-Exempt) tax status. The key feature is that the maturity amount and the overall interest earned during the period of investment are tax-free.
The minimum deposit in PPF Account is ₹ 500/- & the Maximum deposit ₹ 1,50,000/- in a Financial year.
Interest on Public Provident Fund
The interest rate on PPF is reviewed quarterly and may change as per the government’s decisions. presently, it offers a tax-free return of 7.1 percent per annum.
The interest on PPF accounts is calculated on the minimum balance in the account between the fifth day of the month and the last day of the month. The interest on the amount deposited is calculated on monthly basis in PPF, but the interest is credited into the account at the end of the financial year, that is, on March 31 of every year.
The maturity period of the PPF
The maturity period of the PPF account is 15 years. although, it can be extended within one year of maturity for another five years and so on. Also, the PPF account can remain active even after maturity without making any fresh contributions. It continues earning tax-free interest even after maturity.
Premature closure or withdrawal
PPF accounts allow investors to make withdrawals prematurely or partially from the sixth year onward. However, it is limited to one withdrawal per financial year. you can withdraw only up to 50 percent of the amount accumulated in the account at the end of the previous financial year.
PPF investors are allowed to prematurely close their account after five years from the date of opening their account on meeting specific conditions.
Best time to Invest in PPF Account
The interest becomes payable for that month if the deposit is made before the fifth of that month. So, one can get the maximum interest on interest if the amount is deposited before the fifth.
Key Features of Public Provident Fund
- The amount in the PPF account is not subject to attachment under any order or decree of a court of law.
- Deposit in PPF qualifies for deduction u/s 80C of I.T.Act.
- Interest earned in the account is free from Income Tax under Section -10 of I.T.Act.
- Loan facility is available from the 3rd financial year up to the 6th financial year.