The best PPF calculator( for variable and regular fixed annual investments) http://finotax.com/ppf/calculator
1. Eligibility and investment
All individuals can open a PPF account. An individual can also open an account on behalf of a minor.
A person cannot open more than one account in his or her name or even have a joint account. While NRIs are not allowed to open an account, if an individual becomes an NRI while the account is in operation, then he or she can continue to invest in the PPF account, on a non-repatriation basis.
The minimum amount of investment in a PPF account is Rs 500 per annum and the maximum amount of investment in a year is Rs 1,00,000 (w.e.f. 01st Dec, 2011).
In case of a minor's account, the investment in the minor's and guardian's account together cannot exceed Rs 1, 00,000 per annum.
Deposits can be made in a maximum of 12 installments in a year.
2. Duration
The PPF account comes with a lock-in period of 15 years which makes it a long term investment option. However, during the tenure of the account, you can take loans or withdraw amounts subject to certain conditions.
On completion of 15 years, you can extend the tenure of the account in a block of five years, indefinitely.
The limits on investment, tax exemptions and rate of interest remain the same even during the extension period.
3. Rate of interest
Earlier the rate of interest on PPF was fixed at 8 per cent per annum. This was from 2002 until November 2011, post which based on the recommendation of a Committee headed by deputy governor, RBI, the interest rates on various small savings schemes including PPF were linked to the yields on Central Government securities of comparable maturities.
Accordingly, the PPF rate is no longer fixed and can change every fiscal year.
The current rate for FY 2012-13 stands at 8.8 per cent per annum.
The interest on the opening balance and the deposits made during the year gets credited to the account every year on March 31. The interest is compounded annually.
4. Tax exemption
PPF is one of the few investment options which fall into the category of E-E-E (Exempt-Exempt-Exempt) mode of taxation. The s stand for the following:
a. The annual investment into PPF account qualifies for a deduction under Section 80C
b. The interest earned on the PPF account every year is not taxable
c. The lump sum withdrawal at the time of maturity is not taxable
This makes PPF an extremely tax efficient investment option.
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6 lesser-known facts about PPF
1. If you have not made any deposit in a year in PPF, the account gets discontinued. However, the account can be revived by payment of Rs 50 for every year of discontinuation along with the arrears of subscription of Rs 500 per year.
2. The account has a maturity of 15 years but in reality, it runs for a 16-year period. The year of deposit is considered as ZERO year and deposits can be made for 15 more years, which makes it 16 years in all.
3. Ideally, deposits into PPF account should be made between 1st and 5th of the month to get interest for that month. This is because interest gets calculated on the minimum balance between the 5th day and end of the month.
4. It is possible to take a loan as well as make withdrawals from your PPF account, subject to certain conditions. While loans can be taken from 3rd to 6th year, one can start withdrawing from PPF account from 7thyear onwards.
5. A PPF account is free from attachment by a court in respect of any debt or liability incurred by the PPF member. It is also exempt from Wealth Tax.
6. A PPF account can be opened with a minimum deposit of Rs 500 in any of the branches of State Bank of India or branches of its associate banks. You can also make an online transfer from your bank account to your PPF account.
For the debt or fixed income part of your portfolio, PPF is a highly recommended option. The lock-in may work to your advantage if the PPF corpus is dedicated to fulfilling certain long-term goals. Since it's a government-backed scheme, there is no risk to the money. The E-E-E tax status adds to the advantage.
Money management solutions can help you track your PPF account. There are options to enter the details manually or if you have the online account credentials, it can be updated automatically. It would track the current balance, deposits history and show the interest rate applicable, all automated.
It also updates your account maturity and the amount of interest that would accumulate on maturity based on your deposits till date. It definitely proves much handier than flipping through the pages of your passbook.
For investors battered by high inflation and flat returns from stocks and mutual funds, the hike in interest rate on small saving schemes is a bonanza of sorts. The biggest gainers will be account holders of public provident fund (PPF), which now comes with the double benefit of higher interest rate (8.6%) and higher annual investment limit (Rs 1.5 lakh in FY2014-2015)
The best PPF calculator( for variable and regular fixed annual investments) http://finotax.com/ppf/calculator
1. Eligibility and investment
All individuals can open a PPF account. An individual can also open an account on behalf of a minor.
A person cannot open more than one account in his or her name or even have a joint account. While NRIs are not allowed to open an account, if an individual becomes an NRI while the account is in operation, then he or she can continue to invest in the PPF account, on a non-repatriation basis.
The minimum amount of investment in a PPF account is Rs 500 per annum and the maximum amount of investment in a year is Rs 1,00,000 (w.e.f. 01st Dec, 2011).
In case of a minor's account, the investment in the minor's and guardian's account together cannot exceed Rs 1, 00,000 per annum.
Deposits can be made in a maximum of 12 installments in a year.
2. Duration
The PPF account comes with a lock-in period of 15 years which makes it a long term investment option. However, during the tenure of the account, you can take loans or withdraw amounts subject to certain conditions.
On completion of 15 years, you can extend the tenure of the account in a block of five years, indefinitely.
The limits on investment, tax exemptions and rate of interest remain the same even during the extension period.
3. Rate of interest
Earlier the rate of interest on PPF was fixed at 8 per cent per annum. This was from 2002 until November 2011, post which based on the recommendation of a Committee headed by deputy governor, RBI, the interest rates on various small savings schemes including PPF were linked to the yields on Central Government securities of comparable maturities.
Accordingly, the PPF rate is no longer fixed and can change every fiscal year.
The current rate for FY 2012-13 stands at 8.8 per cent per annum.
The interest on the opening balance and the deposits made during the year gets credited to the account every year on March 31. The interest is compounded annually.
4. Tax exemption
PPF is one of the few investment options which fall into the category of E-E-E (Exempt-Exempt-Exempt) mode of taxation. The s stand for the following:
a. The annual investment into PPF account qualifies for a deduction under Section 80C
b. The interest earned on the PPF account every year is not taxable
c. The lump sum withdrawal at the time of maturity is not taxable
This makes PPF an extremely tax efficient investment option.
---------
6 lesser-known facts about PPF
1. If you have not made any deposit in a year in PPF, the account gets discontinued. However, the account can be revived by payment of Rs 50 for every year of discontinuation along with the arrears of subscription of Rs 500 per year.
2. The account has a maturity of 15 years but in reality, it runs for a 16-year period. The year of deposit is considered as ZERO year and deposits can be made for 15 more years, which makes it 16 years in all.
3. Ideally, deposits into PPF account should be made between 1st and 5th of the month to get interest for that month. This is because interest gets calculated on the minimum balance between the 5th day and end of the month.
4. It is possible to take a loan as well as make withdrawals from your PPF account, subject to certain conditions. While loans can be taken from 3rd to 6th year, one can start withdrawing from PPF account from 7thyear onwards.
5. A PPF account is free from attachment by a court in respect of any debt or liability incurred by the PPF member. It is also exempt from Wealth Tax.
6. A PPF account can be opened with a minimum deposit of Rs 500 in any of the branches of State Bank of India or branches of its associate banks. You can also make an online transfer from your bank account to your PPF account.
For the debt or fixed income part of your portfolio, PPF is a highly recommended option. The lock-in may work to your advantage if the PPF corpus is dedicated to fulfilling certain long-term goals. Since it's a government-backed scheme, there is no risk to the money. The E-E-E tax status adds to the advantage.
Money management solutions can help you track your PPF account. There are options to enter the details manually or if you have the online account credentials, it can be updated automatically. It would track the current balance, deposits history and show the interest rate applicable, all automated.
It also updates your account maturity and the amount of interest that would accumulate on maturity based on your deposits till date. It definitely proves much handier than flipping through the pages of your passbook.
For investors battered by high inflation and flat returns from stocks and mutual funds, the hike in interest rate on small saving schemes is a bonanza of sorts. The biggest gainers will be account holders of public provident fund (PPF), which now comes with the double benefit of higher interest rate (8.6%) and higher annual investment limit (Rs 1.5 lakh in FY2014-2015)
Experts say the hike in interest rate has made the PPF the best option for conservative investors. If a couple starts contributing Rs 1 lakh every year, they can together build a tax-free corpus of Rs 61.8 lakh over 15 years. However, this assumes the rate will remain steady at 8.6%, a very unlikely scenario considering the rate is linked to the yield of government bonds. Analysts believe the interest rate cycle is close to peaking out and rates could go down in the coming months (see table).
What's more, if the investor claims tax benefits under Section 80C, his effective return will be close to 16.53%.
The revised rates for small savings are only for this fiscal and the new rates will be announced at the beginning of every financial year. If the PPF rate is 8.6% in the first year but subsequently drops to 7.6%, the corpus at the end of 15 years would be smaller by about Rs 97,500 than what it would earn under the 8% offered till now. "If you want to make the most of your PPF account, be disciplined and contribute every year and do not take loans from the account," says Sumeet Vaid, founder, Freedom Financial Planners.
"After the initial 15 years, one can keep extending the deposit for 5 years at a time," he adds. While the PPF has become more attractive, the new improved NSC with an interest rate of 8.4% but a reduced tenure of five years may not find favour with many investors. Banks are offering up to 9-9.5% on 5-year tax savings fixed deposits.
The State Bank of India offers 9.25% on such deposits. Similarly, fixed deposit and savings bank accounts of the post office, despite the increased rates, are not attractive because banks offer better rates. Besides, it is easier to withdraw money from a bank, thanks to ATMs and their wider reach.
1. PPF - a government backed long term small savings scheme
Public Provident Fund (PPF) is a scheme of the Central Government, framed under the PPF Act of 1968. Briefly, the PPF is a government backed, long term small savings scheme which was initially started by the Government because it wanted to provide retirement security to self-employed individuals and workers in the unorganized sector.
It is today the most popular investment made by Indian citizens. If you are keen on a safe investment, a decent rate of return, tax benefits (deduction and tax free interest) and have a long term investment horizon, then the PPF is for you. It is a disciplined investment avenue as your money is blocked for 15 years.
2. How do I open a PPF account? What should I keep in mind when opening my PPF account?
Head over to your nearest State Bank of India branch, or a branch of any of State Bank’s subsidiaries. You can also open an account in select nationalized banks, and the post office. Fill in the form, attach a photograph, state your PAN Number, and you’re done. Once your formalities are completed, you will receive a pass book which will record all your PPF transactions.
At any point in your life, you are allowed to have only 1 PPF account in your name. You can also have an account in the name of a minor child of whom you are the parent / guardian. However that will be the child’s account, you will simply be the guardian. You can never have a joint account.
If at any time it is seen that you have more than 1 account in your own name, the second account will be deactivated, and only your principal will be returned to you.
If at any time it is seen that you have more than 1 account in your own name, the second account will be deactivated, and only your principal will be returned to you.
If you have a General provident Fund account, or an Employees Provident Fund account, you can still have a PPF account there is no restriction.
3. Can an NRI open a PPF account?
The rule of 25th July, 2003 states that ‘Non Resident Indians are not eligible to open an account under the PPF Scheme’. However ‘Provided that if a resident who subsequently becomes a Non Resident during the currency of the maturity period prescribed under the PPF scheme may continue to subscribe to the Fund till its maturity, on a Non Repatriation Basis.’
So if you open it as an RI, and during the 15 year tenure become an NRI, you can continue to invest, but on a non-repatriable basis.
So if you open it as an RI, and during the 15 year tenure become an NRI, you can continue to invest, but on a non-repatriable basis.
4. When is the best time to invest in PPF account?
The best time to invest is between the 1st and the 5th of any month, preferably April each year. Interest is calculated for the calendar month on the lowest balance at credit of your account, between the close of the 5th day and the end of the month, and is credited at the end of every year.
5. Is a Loan against PPF account allowed?
Yes loan facility is available against a PPF account. The first loan can be taken in the third year of opening the account i.e., if the account is opened during the year 2010-11, the first loan can be taken during the year 2012-2013. The loan amount will be restricted to 25% of the balance including interest for the year 2010-11 in the account as on 31/3/2011. The loan must be repaid in a maximum of 36 EMIs. You can take a second loan against your PPF account before the end of your sixth financial year, but your second loan can be taken only once your first loan is fully settled.
6. Are withdrawals from PPF account allowed?
Any time after the expiry of the 5th year from the date that the initial subscription is made, you become eligible to withdraw an amount of not more than 50% of the previous year’s balance or of the 4th year immediately preceding the year of withdrawal, whichever is less. If you have taken any loan on your PPF, this also gets factored in and reduces your balance. You cannot make more than a single withdrawal in the year. You need to apply with Form C for any withdrawals.
7. What happens after PPF account matures?
You have 3 choices.
Either you can withdraw your maturity amount, or you can extend your account by a 5 year block, as many times as you want and make fresh contributions, or you can extend the account without making any further contributions, and continue to earn interest on it every year.
If you decide to withdraw your money, your maturity value is exempt from tax.
If you decide to extend your account and continue making fresh contributions, you can extend it for a block of 5 years at a time, as many times as you want, you can also make withdrawals from the account, up to 60% of the account balance that was there at the beginning of the extended period. Just remember, if you choose to extend your account, submit the necessary documentation for extension before one year passes from the maturity date.
If you choose to extend your account without making any fresh contributions, you can do so. In this case, any amount can be withdrawn without any restriction; however you can only withdraw once per year. The balance will continue to earn interest till it is withdrawn.
If you decide to withdraw your money, your maturity value is exempt from tax.
If you decide to extend your account and continue making fresh contributions, you can extend it for a block of 5 years at a time, as many times as you want, you can also make withdrawals from the account, up to 60% of the account balance that was there at the beginning of the extended period. Just remember, if you choose to extend your account, submit the necessary documentation for extension before one year passes from the maturity date.
If you choose to extend your account without making any fresh contributions, you can do so. In this case, any amount can be withdrawn without any restriction; however you can only withdraw once per year. The balance will continue to earn interest till it is withdrawn.
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