All you need to know about PPF Account
Public Provident Fund has remained the most popular saving instrument in India and almost every individual in the country has a PPF account. But do you really have total PPF knowledge? Read this space to know the important facts about your PPF account.
Till date, the Public Provident Fund (PPF) scheme is the most popular investment in India. If you're looking for an exemption on the money you invest, interest that is non-taxable and a maturity amount that is exempt from tax as well, this is the instrument for you.
So it's no surprise that with these 3 very prominent benefits, almost every individual in the country has a PPF account and contributes to it religiously every year.
But do you really have total PPF knowledge? Are you aware of interest rate changes in the PPF over time? Do you know that this money can never be attached to any debt or liability i.e. it is yours forever? There are many ways in which you can derive the maximum benefit from your PPF account.
In the first of a 3 part article, we will walk you through the facts you need to have about your PPF Account.
Let's get straight to the facts...
1. PPF stands for Public Provident Fund - a government backed, long term, retirement savings instrument.
With a 15 year lock in, this is the longest horizon for an investment that exists in India. 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. PPF also offers loan against the account which can help you during occasions like a wedding in the family, further studies of your children, etc.
2. The main features are:
a. the 15 year lock in,
b. the E-E-E status (tax exemption on investment, interest and maturity) under Section 80C,
c. the minimum investment of Rs. 500 p.a. and maximum of Rs. 1 lakh p.a. (w.e.f 01-Dec-2011)
d. and the interest rate which currently stands at 8.8% for this fiscal year. The interest rate will be announced annually, it is no longer fixed at 8% p.a.
In fact, the PPF interest rate has steadily dropped over the years, and can be expected to slowly fall as the years proceed. Here’s a look at what rates used to be in the hey-days of the PPF account:
|Period||Interest Rate p.a.|
|01 April 1986 - 14 Jan 2000|
|15 Jan 2000 - 28 Feb 2001|
|01 March 2001 - 28 Feb 2002|
|01 March 2002 - 28 Feb 2003|
|01 March 2003 - 30 Nov 2011|
|01 Dec 2011 - 31 March 2012|
|01 April 2012 till date|
3. An NRI can't opn 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.
4. You can make up to 12 investments in a year into your PPF account, in multiples of Rs. 5.
PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm