PPF Tax Benefits & Features (2024)

FAQs

PPF Tax Benefits & Features? ›

PPF has a lock period of 15 years, and after completing 15 years, if the account holder wishes to extend the period, they can extend it by 5 years. It is an interesting tax-saving tool because the amount invested, interest earned, and the overall maturity amount are all tax-free.

PPF has a lock period of 15 years, and after completing 15 years, if the account holder wishes to extend the period, they can extend it by 5 years. It is an interesting tax-saving tool because the amount invested, interest earned, and the overall maturity amount are all tax-free.

Deposits to a PPF account are exempted from the taxation up to a maximum of Rs. 1.5 lakh in a FY under Section 80C of the Income Tax Act, 1961. A Tax saving fixed deposit has a higher interest-earning potential than savings accounts. The second exemption is on the interest earned from your PPF deposits.

Public Provident Fund (PPF)

You can claim a tax exemption of Rs. 1.5 lakh, each year, under Section 80C of the Income Tax Act. However, this scheme has a lock-in period of 15 years. At the end of 15 years, you have the option to increase the investment tenure for another five years.

PPF investment has tax saver benefits under Section 80C deductions. It is one of the few investment plans in India that enjoys the advantage of Exempt-Exempt-Exempt (EEE) tax status. The tax-exempted amount deposited in the Public Provident Fund in each financial year up to Rs. 1,50,000 is exempted from tax.

In total, there are 3 types of production possibility curves. Namely, straight line sloping down, concave and convex. When the line is sloping downwards, it shows that there will be less production of one good and more of the other which will always remain constant.

Both FD and PPF are good options for risk-averse investors. PPF is preferred by people who are looking to save taxes along with investing for the future. Due to the government backing, the security it provides is unmatched.

The downside of PPF is that installing the film can be time-consuming, and if it is not done correctly, it can cause damage to the paint underneath when it's being removed. It's also a “you get what you pay for” situation both when it comes to the brand of PPF and the installer you choose.

Can I deposit 1.5 lakh in PPF in one time? ›

You cannot deposit more than Rs. 1.5 lakhs in the PPF Account in any given financial year. The deposit frequency, however, is not limited. Earlier, the PPF account max deposit was twelve times in one financial year.

Maturity: A PPF account matures in 15 years, and you can extend it in blocks of 5 years each. You must extend the tenure within one year of maturity.

The PPF interest rate, on the other hand, has remained unchanged at 7.1%. The Public Provident Fund (PPF) is one of the popular long-term investment schemes backed by the Government of India.

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.

1.5 lakhs per year, therefore, all deposits made to your PPF account can be claimed as deductions u/s 80C. Section 80C allows for a maximum deduction of Rs. 1.5 lakhs per year inclusive of all investment instruments.

Only Indian citizens residing in the country can open a PPF account. Individuals over 18 years will meet the age requirement for PPF eligibility. There is no upper age limit for opening a PPF account.

How to Maximize PPF Returns? Invest before the 5th of every month. PPF interest is calculated on the lowest balance between the 5th and last day of every month. For instance, if you deposit Rs 10,000 on 2nd Jan and another Rs 10,000 on 15th Jan, the interest will only be calculated on Rs 10,000 and not Rs 20,000.

For long-term, risk-free investments, the Public Provident Fund (PPF) remains one of the most preferred instruments among investors. Tax-saving benefits and tax-free returns make PPF an ideal investment for long-term financial goals.

EPF withdrawal becomes taxable if withdrawn before 5 years of completed service. PPF withdrawal is not taxable. Investment in the EPF qualifies for tax deduction under Section 80 C of the Income Tax Act up to Rs 1.5 lakh per annum. This applies to both the employer and employee contribution.

Which point on the PPF is most efficient? ›

Points that lie strictly below the frontier/curve are inefficient, because the economy can produce more of at least one good without sacrificing the production of any other good, with existing resources and technology. Points that lie on the frontier/curve are efficient.

The Production Possibilities Frontier (PPF) is a graph that shows all the different combinations of output of two goods that can be produced using available resources and technology. The PPF captures the concepts of scarcity, choice, and tradeoffs.

Assuming an interest rate of 7.1% per annum, the interest earned on an investment of ₹ 5000 in PPF for one year will be approximately ₹ 355. The total balance in the account at the end of the year will be ₹ 5000 + ₹ 355 = ₹ 5355.

As such, an NRI cannot invest in PPF. However, if people with current NRI status, opened a PPF account before they got the NRI status, they can continue with the account until maturity. *All savings are provided by the insurer as per the IRDAI approved insurance plan.

Further, an individual will earn a higher interest by making a lump sum investment every financial year than monthly deposits in PPF account. If an individual makes a PPF investment of Rs 12,500 before the fifth of every month, the individual will get a maturity amount of Rs 39,44,599.

According to the PPF rules, an individual can have only one PPF account in their name. Since there are no age restrictions, a PPF account can be opened in the name of a minor child. The account can be opened either by the father, mother, or guardian. But, one child can have only one PPF account.

After PPF, ELSS is one of the most tax friendly 80C investment options. ELSS capital gains of up to Rs 1 lakh in a financial year are tax free. Capital gains in excess of Rs 1 lakh are taxed at 10%.

Also make the initial deposit for opening the PPF Account. Once the application form and your documents are verified by the bank, the PPF Account would be opened in your name. Many leading banks like SBI, HDFC Bank, ICICI Bank, Axis Bank, etc. allow you to open a PPF Account online from your home or office.

As mentioned before in the article, the minimum amount that needs to be invested in the PPF account is ₹500. If an individual fails to deposit this amount at the end of the year, their account will be discontinued.

Any point inside the PPF, such as point 'X' is said to be inefficient because output could be greater from the economy's existing resources. Any point outside the PPF, such as point 'Z', is impossible with the economy's current scarce resources, but it may be an objective for the future.

Why is PPF inefficient? ›

The Pareto Efficiency states that any point within the PPF curve is inefficient because the total output of commodities is below the output capacity.

To maximise the interest payout on PPF deposits, you should choose to deposit by the 5th of the month, and the sooner in the financial year, the better. If you deposit towards the end of the financial year in March, you will surely save income tax but earn interest only for one month—March—for that FY.

A person is allowed to make a maximum of 12 deposits per financial year in the PPF account. Also, such deposits cannot be more than 2 in any particular month.

By investing Rs 2000 per month (or Rs 2000x12 = Rs 24000 per year), you can get up to Rs 7 lakh upon maturity after 15 years.

You can make only one partial withdrawal each year. To make the withdrawal, you will have to submit the PPF passbook and an application to the bank/ post office. The amount withdrawn is exempt from income tax. This too remains unchanged in the PPF withdrawal rules 2021.

it offers a steady return on your regular savings and is considered a highly safe investment form. although withdrawal from ppf is allowed after a specific duration, it is a long-term instrument that requires 15 years of regular saving. you can extend it further in blocks of five years.

Deposit Amount – This amount is to be deposited in the PPF account as per the deposit frequency. Thus if the deposit amount is Rs. 1,000 and the Deposit Frequency is monthly, the total PPF deposit for the year will be Rs. 12,000 and automatically calculated by the PPF calculator.

As per the public provident fund rules, the interest on your PPF account is calculated on a monthly basis but the amount is credited to your account at the end of the financial year on March 31.

How can I avoid tax in India? ›

Earlier, you could deposit funds in your PPF account only twelve times during a financial year. However, per the new PPF rules, there is no restriction on the number of deposits. You can deposit funds in multiples of Rs 50, but, per usual, your maximum annual deposits cannot exceed Rs 150,000.

As per the Public Provident Fund (PPF) scheme rules, the interest on PPF is calculated at the end of balance between fifth and end of the month. Hence, by making a deposit in PPF account on or before fifth of month will help PPF account holder to earn more interest.

"Amount beyond Rs 1.5 lakh cannot be deposited in the PPF account as the transaction will be rejected at the time of transfer. Thus, the question of excess amount doesn't arise. Even if the depositor manages to deposit more than the limit, the transaction shall be subsequently rejected.

A Public Provident Fund or a PPF account has a 15-year lifespan, after which you can either close the account or extend it by five years with or without contributions. The number of extensions is unrestricted. Therefore, you can extend the maturity of your PPF account to 20 years, 25 years, 30 years, and so forth.

As per the PPF rules, you can withdraw the PPF amount after the completion of the lock-in period of 15 years. Once the 15 years PPF lock-in period is completed, you can close the account by withdrawing the entire contribution made towards the account along with the interest that has been generated.

About PPF. Public Provident Fund (PPF) is one of the most popular investment options for creating a long-term retirement fund. It carries low risk, moderate returns, and added tax benefits and these make PPF an attractive option for investment.

There is no restriction on the age limit to open a PPF account of a minor. However, a PPF account of a minor can only be handled by a parent/guardian on his/her behalf until the account holder turns 18.

The basic assumptions of production possibility curve are: The resources are given and remain constant. The technology used in the production process remains constant.

Deposit rules:

You have to make at least one deposit per year for 15 years. The PPF minimum deposit is ₹500, while the maximum that can be invested in a financial year is ₹1.5 lakh. If you make any deposit in excess of ₹1.5 lakh in a financial year, the transaction will be automatically rejected.