PPF is one of the most preferred Tax Saving investments[Important]

Introduction to Public Provident Fund account (PPF) Account:

• Public Provident Fund (PPF) scheme is a long term investment option that offers an attractive rate of interest and returns on the amount invested.
• The interest earned and the returns are not taxable under Income Tax.
• One has to open one PPF account under this scheme and the amount deposited during a year will be claimed under section 80C deductions.

Who is eligible under PPF Account:

• Any Indian citizen can invest in PPF.
• One citizen can have only one PPF account unless the second account is in the name of a minor.
• NRIs and HUFs are not eligible to open a PPF account. However, if they have an existing PPF account in their name, then it shall remain active till its completion date. However, these accounts cannot be extended for 5 years as in the case of Indian citizens.

Public Provident Fund account Importance:

• PPF account is one of the best investment options for individuals who have a low-risk appetite.
• PPF is a government-backed scheme, and the investment is also not market-linked. Due to this, it offers guaranteed returns to protect the investment needs of many people.
• As the returns from PPF accounts are fixed, they are used as a diversification tool for the investor’s portfolio. Additionally, they also offer tax-saving benefits.

8 Major Features of PPF

• Tenure: The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish.
• Investment Limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 instalments.
• Opening Balance: The account can be opened with just Rs 100. Annual investments above Rs 1.5 lakh will not earn interest and will not be eligible for tax savings.
• Deposit Frequency: Deposits into a PPF account has to be made at least once every year for 15 years.
• Mode of deposit: The deposit into a PPF account can be made either by way of cash, cheque, demand draft (DD) or through an online fund transfer.
• Nomination: A PPF account holder can designate a nominee for his account either at the time of opening the account or subsequently.
• Joint accounts: A PPF account can be held only in the name of one individual. Opening an account in joint names is not allowed.
• Risk factor: Since PPF is backed by the Indian government, it offers guaranteed, risk-free returns as well as complete capital protection. The element of risk involved in holding a PPF account is minimal.

Steps for open a PPF account:

A PPF account can be opened with either a Post Office or with any nationalised bank like the State Bank of India or Punjab National Bank, etc.

You need to submit below mentioned documents:

1. Duly filled account opening application form
2. KYC documents such as Aadhaar, Voters ID, Driving license, etc.
3. Residential address proof
4. Nominee declaration form
5. Passport size photograph
6. Post submitting these documents you can deposit a prescribed amount towards the opening of the account.

Procedure for Loan Against PPF Account:

• You can take a loan against your PPF account between the 3rd and 6th year. The maximum tenure of the loan is three years (36 months).
• The loan amount can be a maximum of 25% of the total available amount.
• A second loan can be taken before the 6th year if the first loan is repaid fully.

Tax benefits of investing in PPF:

• PPF are deductible under Section 80C of the Income Tax Act. However, it should be noted that the maximum contribution in PPF cannot exceed Rs.1.5 lakh in one financial year
• Furthermore, the accumulated amount and interest is also exempt from tax at the time of withdrawal.
• It is important to note that a PPF account cannot be closed before maturity.
  A PPF account, however, can be transferred from one point of designation to another. But, do remember that a PPF account cannot be closed prematurely. Only in the case of the account holder’s demise can the nominee’s file for the closure of the account.

PPF withdrawal procedure:

• One can fully withdraw the PPF account balance only upon maturity i.e. after the completion of 15 years.
• However, if account holders are in need of funds, and wish to withdraw before 15 years, the scheme permits partial withdrawals from year 7 i.e. on completing 6 years.
• An account holder can withdraw prematurely, up to a maximum of 50% of the amount that is in the account at the end of the 4th year (preceding the year in which the amount is withdrawn or at the end of the preceding year, whichever is lower). Further, withdrawals can be made only once in a financial year.