Whenever saving taxes is a concern, PPF is the right option to choose. There are some reasons why it’s preferred over the other tax saving schemes and options. One, its tax-free yearly interest, secondly annual compounding. Every PPF has a closed tenure of 15 years which means the result of compounding will be better than expected. Generally, it’s relevant to link PPF to one of the financial goals like retirement, child education, etc.
The interest rate of PPF is set out by the government every quarter and that depends on the performance of the attached government securities. It kept changing with the passage of time. In 1968-69, PPF was at an interest rate of offered a 4%, in 1986-2000 at around 12%. The present interest rate is exactly at 7.6% per annum.
PPF is the most advocated small savings funds scheme. You can put upto 1.5 lacs in one financial cycle with a nominal amount of Rs.500. The deposit amount can be made both in lumpsum or installments. This investment type also exempts it under Section 80C of the IT Act. The best PPF plans can be fetched at a click now!
Some PPF tax benefits are as follows:
1) Withdrawal– Partial withdrawal from PPF is permitted starting from 7th financial year onwards. Around 50% is allowed is allowed to be withdrawn at the end of the 4th year immediately preceding the year of withdrawal or the amount at the end of the preceding year, whichever is lower.
2) Account Continuity– A PPF account is allowed to be continued even after maturity.
3) Extension of Maturity- Maturity of the PPF account can be extended to an additional block of 15 years, which is beyond 15 years.
4) Partial Withdrawal- A partial withdrawal can be made plausible during the extended period. Partial withdrawals from PPF account are also tax-free.
5) Interest Payable– Interest accruing on the PPF account can be calculated using the minimum balance available in the account from 5th of a month to the last date of the month. So, in case you have deposited money after the fifth day of the month, you may lose some money in the form of interest income in the very month.