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The Ultimate Guide to PPF: Understanding Its Benefits and Returns

Public Provident Fund or PPF is a very dependable and popular investment tool meant for long term savings of your hard earned money. Undoubtedly, PPF is a trustworthy small-savings and investing scheme which allows people to preserve their liquid money for long-term financial success.

These funds are unrelated to market dynamics and aren’t affected by market volatility. Many working people also use these as a popular retirement plan because of the low risk and appreciation in the value of their money over time. Read this blog to educate yourself about PPF and its benefits.

Benefits of a PPF Account

Here are the major benefits of opening a PPF account:

  • High interest rates 

PPF offers higher interest rates when compared to other forms of savings and investment. PPF account usually provide an interest rate of 7-8%, whereas a savings account may offer an interest rate of roughly 3-4%. Because of this, PPF accounts are now a more attractive choice for anyone trying to maximise their savings returns.

  • Tax benefits 

PPF also offers tax benefits under section 80C of the Income Tax Act. upto  Rs. 1.5 lakh annually. In addition, there is no tax on the maturity amount or interest that is earned on the investment. PPF is a desirable choice for investments that reduce taxes because of its dual tax benefits.

  • Safe investment 

PPF is backed by the Government of India, guaranteeing a secure investment. PPF accounts guarantee returns and safeguard the principal amount, in contrast to stock market or mutual fund investments, which are vulnerable to risks and market swings. 

  • Apply for loans 

PPF account holders are eligible to request a loan up to 25% against their PPF balance once a year has elapsed from the end of the year in which the initial subscription was made. This provides liquidity and financial help when needed.

  • Eligible for Partial Withdrawals

Partial withdrawals from PPF accounts are permitted after five years from the end of the year the account was opened. At the conclusion of the fourth year that immediately precedes the year of withdrawal, or at the end of the previous year, whichever is lower, the account holder may withdraw up to 50% of the balance. This feature is only available once each year for use with active, non-canceled accounts. 

Understanding PPF Interest Rates

PPF interest rates are decided by the Indian government since it is a government backed scheme. These interest rates can change every three months and currently, the PPF interest rate stands at 7.1% per year.

A PPF account is a tool for long-term savings. It aims to provide tax benefits while encouraging individuals to save. The account can be extended indefinitely in five-year intervals, with a minimum lock-in period of 15 years.

Each financial year, individuals can contribute to their PPF account with a minimum of Rs. 500 and a maximum of Rs. 1.5 lakh. Both the interest earned on the account and the principal invested qualify for tax deductions under section 80C of the Income Tax Act.

Who is Eligible to Open a PPF Account?

Check if you are eligible to open a PPF account:

  • You have to be a citizen of India. 
  • A PPF account may only be opened once.
  • PPFs cannot be opened by HUFs after May 13, 2005. 
  • Parents or guardians can open and operate a PPF account for minors till they reach the legal age.
  • When opening a PPF account, non-resident Indians (NRIs) have 15 years to use it before it expires without the opportunity to extend it.

Documents Needed for PPF

These are the documents that you will need to open a PPF account:

  • KYC includes voter ID, passport, Aadhaar card, and PAN card.
  • Rental agreement, utility bills, passport, and Aadhaar card for address proof. 
  • Submit your recent passport-sized photos.
  • Filled account opening form.
  • Nominee details.

How to open a PPF account 

This is how you can open a PPF account:

  • Choose a leading reputable bank such as ICICI Bank.
  • Log in to its website or mobile banking app.
  • Choose the tab “Open a PPF Account.”
  • Select “Minor Account” if opening on behalf of a minor or “Self Account” if opening on your own.
  • Complete the application form with the necessary information, then double-check it.
  • The amount you intend to deposit each financial year should be entered.
  • Establish standing orders to have the designated amount automatically deducted from your savings account and deposited into your PPF account.
  • Enter your registered mobile number to receive an OTP.
  • Enter the OTP to verify. 

You have now established your PPF account! You will receive a message and an email confirmation with all the information.

Conclusion 

Public Provident Funds, or PPFs, are a very popular financial tool which can assist you in investing and saving money for long-term growth. In addition to the numerous other advantages listed above, these provide tax deductions under section 80C of the Income Tax Act. This is a highly recommended way to save money, and since opening a PPF account is available from many major banks, opening an account online is simple and hassle-free. 

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