Despite a number of investment avenues, Public Provident Fund remains the most popular and sought-after investment for the common man and risk-averse investors. PPF is popular because it offers a complete package of benefits. It currently offers an interest rate of 7.6% per year, effective 1st January 2018. In addition to this, PPF contributions enjoy Section 8C Tax deductions up to Rs 1.5 Lakhs and withdrawals on maturity are tax-free.
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The procedure of opening a PPF account is not difficult. It can be opened without any hassles. You can open a PPF account in post offices and at public sector banks. Most banks also allow you to open a PPF account online, provided you visit the bank to get your application and documents, verified and stamped.
So, if you are a risk-averse investor or even an aggressive investor willing to widen the scope of your investment portfolio, you must open a PPF account.
Before you actually open a PPF account, following are some important points you must note:
1. A PPF account can be opened in your name and/or a minor’s name.
2. A PPF account cannot be opened in the name of a Hindu Undivided Family (HUF). A Joint PPF account can’t be opened.
3. You need a minimum of Rs 1,000 to open a PPF account. Thereafter, a minimum of Rs 500 needs to be deposited in the account each financial year to avoid a penalty.
4. You can deposit a maximum of Rs 1,50,000 per year in a PPF account, with a maximum of 12 installments or in a lump sum.
5. Investments in a PPF account are blocked for a period of 15 years which is the maturity period of the PPF account.
6. You can extend the investment in the PPF account beyond its maturity, in one or more blocks of 5 years. This has to be done within a year of maturity.
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7. Nomination facility is available for the PPF account.
8. A PPF account can be transferred from one post office to another, one bank to another, one post office to a bank or a bank to a post office at the request of the account holder.
9. You can avail a loan starting from the 3rd financial year after the opening of the account. Withdrawals can be made every year starting from the 7th financial year. Loans and withdrawals are subject to the age of the account and balances as on the specified dates. Premature withdrawals can be done as per the rules.
10. PPF enjoys EEE Tax benefits. Deposits are eligible for Tax deduction under Section 80C of the IT Act, 1961. Interest income and Maturity amount withdrawn are Tax-free.
11. The rate of Interest changes on a quarterly basis.
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