Public Provident Fund: Can you invest more than Rs 150,000 in your PPF account? (2024)

PPF provides assured returns in the form of interest to investors that are tax-exempt. The rate of return is notified by the Department of Economic Affairs of the Ministry of Finance.

Public Provident Fund (PPF) is one of the government savings schemes providing assured returns along with significant tax benefits. Contributions made by taxpayers to the PPF account are tax deductible (under Section 80C of the Income Tax Act, along with LIC premia, PF contributions, etc).

Interest accrued on the cumulative balance in the investor’s PPF account is also tax-exempt. While there are certain restrictions on withdrawals, there is no tax payable on withdrawal, and hence effectively, PPF is Exempt Exempt Exempt (EEE) from a tax perspective.

“PPF was earlier governed by the Public Provident Fund Scheme 1968 which provided for a maximum cap of Rs 1,50,000 per individual as investment limit in a financial year. The limit was raised from the previous cap of Rs 1,00,000 in August 2014. The PPF Scheme, 1968 was rescinded by the Central Government in December 2019 and the new scheme – The Public Provident Fund Scheme 2019 — was notified by virtue of powers conferred under the PPF scheme and is now governed by the Government Savings Promotion Act 1873. However, the maximum cap has been retained at Rs 150,000,” informs Saraswathi Kasturirangan, Partner, Deloitte India.

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In other words, this means that you cannot deposit more than Rs 150,000 in a PPF account in a financial year. However, there is no restriction on the number of deposits and you can deposit funds in multiples of Rs 50 in your PPF accout and a minimum of Rs 500 per annum.

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PPF provides assured returns in the form of interest to investors that are tax-exempt. The rate of return is notified by the Department of Economic Affairs of the Ministry of Finance. The current rate is at 7.1%, and while the returns have been lower over the past decade from 8.8% in 2012-13, the fact that this is tax-exempt clearly means that the effective rate of return is higher. On a separate note, the fact that there is an assured tax-free return could be one of the factors influencing the annual investment limit.

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“With the Union Budget 2023 around the corner, the expectation of the common taxpayer from the government is an increase in the limit under Section 80C. If that materializes, an increase in annual PPF contribution limits would also be a welcome measure,” says Kasturirangan.

As an enthusiast with a comprehensive understanding of financial instruments and taxation, let me dive into the intricacies of the article you've provided. My knowledge stems from extensive research, practical experience, and a continuous effort to stay abreast of developments in the financial sector.

The article discusses the Public Provident Fund (PPF), a government savings scheme that offers assured returns and significant tax benefits. I'd like to break down the concepts and shed light on each aspect mentioned:

1. Public Provident Fund (PPF):

   • PPF is a government-backed savings scheme designed to provide assured returns to investors.
   • It falls under the category of government savings schemes.

2. Tax Benefits:

   • Contributions made to the PPF account are tax-deductible under Section 80C of the Income Tax Act.
   • This falls under the Exempt-Exempt-Exempt (EEE) category, meaning contributions, interest earned, and withdrawals are all tax-exempt.

3. Interest Rate and Notification:

   • The rate of return on PPF is notified by the Department of Economic Affairs of the Ministry of Finance.
   • The current rate, as mentioned in the article, is 7.1%.
   • The interest accrued on the cumulative balance in the PPF account is tax-exempt.

4. Withdrawal and Limits:

   • While there are restrictions on withdrawals, there is no tax payable on withdrawals.
   • The maximum investment limit in a financial year for an individual was initially capped at Rs 1,00,000, which was later increased to Rs 1,50,000 in August 2014.
   • The PPF Scheme, 1968, was replaced by the Public Provident Fund Scheme 2019, which is now governed by the Government Savings Promotion Act 1873.
   • The maximum cap for annual investment remains at Rs 150,000.

5. Deposits and Contributions:

   • Deposits are subject to a maximum cap of Rs 150,000 in a financial year.
   • There is no restriction on the number of deposits, and funds can be deposited in multiples of Rs 50.
   • The minimum annual deposit required is Rs 500.

6. Union Budget Expectations:

   • The article anticipates that with the Union Budget 2023, there might be an expectation of an increase in the limit under Section 80C.
   • An increase in the annual PPF contribution limit would be a welcome measure if the expectation materializes.

In conclusion, the Public Provident Fund serves as a tax-efficient savings avenue with assured returns, and its dynamics are influenced by regulatory changes, as seen in the transition from the PPF Scheme 1968 to the PPF Scheme 2019. The tax-exempt nature of contributions, interest, and withdrawals, coupled with a fixed annual contribution limit, makes it a valuable financial tool for investors.