For people who are looking for a safe investment alternative, PPF is the answer! Started by the central government under the PPF in 1968, Public provident fund is not only a safe and secure investment option, but it can also help you save your income tax outgo on your investment and its return.
What Is PPF Tax Exemption?
Public Provident Fund (PPF) account is a long-term investment option. PPF scheme is available for all Indian citizens. The PPF account can be opened in the authorized banks or post offices. PPF has been one of the most popular and affordable investment options for approximately many decades. Many investors prefer to invest in PPF accounts.
There are various benefits of a PPF account, but one of the essential ones is PPF exemption. The income generated through PPF is tax-free under Section 80C of the Income Tax Act, 1961. The interest rate earned on the PPF account will be credited by the start of the financial year. The Indian government sets the interest rate of the PPF account. Additionally, the maturity proceeds of the PPF account are also exempt from taxation.
The lock-in period of the PPF account is 15 years. So, at the end of 15 years, you will receive the maturity benefits. However, you can extend the maturity period of your PPF account for five years.
Key Takeaways
- As per the PPF rules, a minimum of INR 500 contribution has to be made every financial year. The maximum limit allowed is INR 150,000 per year.
- The maturity amount and interest rate earned in PPF are tax exempted. You will receive PPF exemption section under 80C of the Income Tax Act, 1961.
- You have options to invest in a PPF account. You can either invest in a lump sum or monthly or annually.
- The Indian government sets the interest rates on the PPF account. The current interest rate is 7.1%.
How Does a PPF Account Work?
The objective of the PPF account is to provide savings in small amounts for people and help them cultivate the habit of investment. It is the most basic ad popular type of instrument, and the amount can be a minimum of INR 500 to a maximum of INR 150,000. The investment amount can vary substantially and as per your choice. The interest rate of the PPF scheme is set by the Indian government. The current interest rate on the PPF account is 7.1%. Due to the PPF exemption, the interest earned in the PPF scheme is also tax-free under Section 80C of the Income Tax Act.
You can also provide standing instructions to your desired bank to have a certain amount deducted every month or year to make it easy. You can check and maintain your PPF account online too.
Why Should You Invest In PPF?
The PPF account is one of the most popular investment schemes which is backed by the Indian government. It is the best scheme for long-term investment for post-retirement. It gives assured tax-free returns with attractive interest rates. A PPF account is a long-term investment with a lock-in period of 15 years. So, the amount accumulated in a PPF account can be withdrawn only at maturity, 15 years from opening the account. You can also extend the tenure by 5 years at the end of the lock-in period. Partial withdrawals are only allowed in case of emergencies.
You also get advantages of PPF tax exemption. The tax from your maturity amount is totally free. So, you can create a good corpus for your retirement.
The PPF account also provides loans against the PPF balance. However, you are allowed to take a loan between the beginning of the 3rd financial year and the end of the 6th financial year from the date of account opening.
The PPF scheme is beneficial for investors who are planning for retirement. The maturity amount can also be used for your child’s higher studies and marriage. The PPF scheme is available at all government-approved banks.
The other main reason to invest in the PPF scheme is that you can easily calculate the maturity amount and interest rate before investing in it. PPF Calculator is a financial tool that helps calculate the income you can receive at the time of maturity. It is effortless to use the PPF calculator. You can add your investment details and get the amount figure reflected in your account.
Is PPF Exempt From Tax?
By investing in tax-saving instruments, you can decrease your tax burden. You can easily distinguish between tax planning and financial planning. There are several ways to save taxes, one of the most popular is PPF. PPF tax exemption is widely known for its safety and good return. An individual can claim the tax deduction in PPF under Section 80C of the Income Tax Act, 1961.
The PPF account has a maximum deposit limit of INR 150,000 every year. So, you can claim the whole 80C discount for your PPF investment. The PPF account scheme is one of the best tax-saving schemes for those who are not covered under EPF and are risk-averse investors.
How to Claim Deductions on PPF Investments
You must include information about the PPF investments you made during a given year in your income tax returns in order to claim such investments as ppf tax exemption section 80C. You can enter the amount you invested to claim deductions in the section for exemptions under 80C together with any supporting documentation. For the amount invested during the financial year, PPF offers a deduction under Section 80C of the Income Tax Act of up to Rs 1.5 lakh. Now that you have learnt, ppf maturity amount exempt under which section, let us look at the eligibility criteria to apply in PPF.
Eligibility for Apply in PPF
There are certain criterias to fullfill in order to become eligible to open a PPF account. Once you open a PPF account, you also need to satisfy some more cirterias in order to be eligible for tax benefits under section 80C of the income tax act.
Here are the requirements for opening a PPF account that one should be aware of before making an investment.
- A PPF account can only be opened by Indian citizens who are residents of the nation.
- People who are above 18 years old are eligible for PPF benefits. The maximum age to open a PPF account is indefinite.
- One PPF account in your name may be opened. You are not permitted to open a second PPF account, even if you meet all qualifying requirements.
- In addition to being of legal age to open a PPF account, applicants must submit specific supporting documentation in order to submit a successful application.
Benefits of PPF Beyond Tax Exemption
As we discussed PPF tax exemption, there are several other benefits of a PPF account that you should know. PPF is the best option for those who are looking for a low-risk investment. It is a long-term investment tool that helps you save a corpus for your retirement. The premiums on PPF are flexible, and the returns are high. PPF account benefits are endless, but here are the most helpful ones.
The PPF investment is a safe investment product. Since it is not linked to any markets and is backed by the Indian government, the PPF account has lower risks than other saving schemes.
Nomination Facility
A PPF account can be opened by anyone. The age limit for opening a PPF account is 18 years or above. It is a significant benefit that the PPF account comes with a nomination option. So, you can add a nominee to your account. This is also known as a death benefit. If any tragic event happens to the investor, the maturity amount will be provided to the nominee.
Loan Facility
You are eligible to get a loan from the bank against a PPF account. You can get a loan facility between the 3rd and 6th years of the created account. You can also make partial withdrawals from your PPF account on completion of 5 years from the end of the year in which the account was opened. It is recommended to use this feature in case of an emergency.
Extension of Account
The maturity time of a PPF account is 15 years from the end of the financial year in which the account was opened. At the time of maturity, the account holder can extend the lock-in period in the blocks of 5 years. The choice of extension has to be made within one year from maturity.
Guaranteed Returns
The government of India guarantees the return on PPF investment. One of the PPF account benefits is that you can also decide if you want to invest in a lump sum or monthly. A PPF account is not only affordable, but it also provides higher returns as well as financial security. The current interest rate on the PPF account is 7.1%.
Government Backing
PPF scheme is one of the safest investment avenues for investors with low risk appetite. It was created by the central government under the PPF act of 1968. Since it is backed by the government , there are no chances of losing your investment. this factor makes it one of the safest investment venture.
Conclusion
PPF is for those who want long-term investment to achieve their future financial goals. It is a fact that the PPF scheme is the safest investment option compared to other saving schemes. You can maintain your PPF account without any hassles. PPF tax exemption helps you to create a good fortune for the future.
FAQs
Yes, PPF tax exemption is available under Section 80C of the Income Tax Act, 1961.
No, you can only create one account in your name.
The age limit to open a PPF account is 18 years or above.
PPF investment is entirely risk-free as it is backed by the Indian government. The minimum amount you can invest in PPF is INR 500, and the maximum amount you can invest in PPF is INR 150,000 yearly.
Yes! Under ppf tax exemption section 80C of the Income Tax Act, 1961, PPF is tax free on maturity.
Any Public Provident Fund (PPF) contribution may be claimed as a tax deduction under ppf tax exemption section 80C.
Under Section 80C of the Income Tax Act of 1961, deposits made to a PPF account are exempt from taxation up to a maximum of Rs. 1.5 lakh in a fiscal year.
The maximum investment in PPF account is 1.5 Lakh per year.
Also Read: Calculating PPF
