What is a PPF account?
PPF Stands for “Public Provident Fund “.
It is an investment option which not only offers attractive interest rate but also a safe mode of long-term investment.
Who is eligible to invest in PPF?
- Any Indian citizen can open PPF a/c.
- One citizen can have only one PPF account.
- The second a/c can be opened if it is in the name of a minor.
- NRIs and HUFs are not eligible to open a PPF account.
Types of PF in India?
In India, there are three types of provident funds, namely –
General Provident Fund (GPF),
Employees’ Provident Fund (EPF) and
Public Provident Fund (PPF).
How to open a PPF account?
What is the interest rate on PPF?
Various Forms in PPF
Loan against PPF
You can get a loan from the third year and till the sixth year after opening the PPF account. The amount of loan is limited to 25% of the balance that stood in the PPF account of the person at the end of 2nd year or the year preceding the year in which loan has been applied.
A fresh loan is not allowed when a previous loan or interest is outstanding. Interest is charged at a rate of 1% if repaid within 36 months and at 6% on the outstanding loan after 36 months. The repayment may be made either in lump-sum or in Instalments.
Eligible amount for Loan = 3,21,300*25/100 = 80,325
Type of Withdrawal
On what grounds
Tax benefits and PPF a/c
Investors get Tax benefits on PPF Investments U/s 80C.
It is EEE category Investment. Means its Investment, Return and Maturity is exempt
The Finance Bill 2021 proposes to insert Proviso to Sections 10(11) and 10(12) – “providing that the provisions of these clauses shall not apply to the interest income accrued during the previous year in the account of the person to the extent it relates to the amount or the aggregate of amounts of the contribution made by the person exceeding Rs. 2, 50,000 in a previous year on or after the 1st day of April 2021 and computed in such manner as may be prescribed”.
The same can be easily understand by following example : -
Mr. Z’s total contribution (including voluntary provident fund) to Employee Provident Fund (EPF) is Rs 4,50,000 in the FY 2021-22. Assuming the rate of interest on EPF is 7.1% per annum; his tax liability will be calculated in the following manner:
It is worth noting that maximum investment limit in Public Provident Fund ( PPF) is Rs. 1.5 Lakh only .