The Public Provident Fund (PPF) is a long-term savings and investment scheme offered by the Government of India. It was introduced in 1968 under the Public Provident Fund Act and is aimed at encouraging savings and providing a safe and attractive investment option for Indian citizens.
The PPF is a popular savings instrument in India, known for its tax benefits and relatively secure returns.
Key features of the Public Provident Fund (PPF) include:
Tenure: PPF has a fixed term of 15 years, but it can be extended in blocks of 5 years after maturity.
Interest Rate: The interest rate on PPF is set by the government and is typically higher than regular savings account. The rate is subject to change periodically. Interest is compounded annually.
Tax Benefits: PPF offers tax benefits to investors. The contributions made to a PPF account are tax-deductible under Section 80C of the Income Tax Act. The interest earned and the maturity amount are also tax-free.
Account Type: Individuals can open a PPF account at designated banks and post offices in India. A single individual can have only one PPF account in their name. However, a parent can open a PPF account for their minor child.
Minimum and Maximum Contributions: There is a minimum annual contribution that must be made to keep the account active, and there is a maximum limit on annual contributions. Both of these are set by the government and can change from time to time.
Partial Withdrawals: After the completion of the sixth financial year, the account holder can make partial withdrawals, subject to certain conditions and restrictions.
Loan Facility: After a few years of maintaining the account, account holders can also avail of loans against their PPF balances.
Nomination: Account holders can nominate a person to receive the PPF balance in case of their demise.
Transferability: PPF accounts can be transferred from one authorized bank or post office to another.
PPF is considered a safe and secure investment option because it is backed by the government, and the interest rate is relatively stable. It is a good choice for individuals looking for long-term savings with tax benefits.
However, it's important to note that PPF accounts have a lock-in period of 15 years, and early withdrawals are generally not allowed except under specific conditions.
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