The Public Provident Fund (PPF), the government-backed compact savings scheme run by the Ministry of Communications, can be looked at for frequent deposits. Experts say the recognition of this scheme as an investment solution other than its tax advantage is for the reason that it can be began with a minimal investment quantity.
Along with the protected and safe nature of this investment, the triple tax break — EEE (Exempt, Exempt, Exempt) – also lures investors to this scheme.
Even although PPF gives assured returns each and every year, the precise figure fluctuates. Interest on PPF is compounded annually and gets credited to the depositor’s account on March 31 each and every year. Even although the interest is credited into the account on the last day of the monetary year, it is calculated each and every month. Note that, interest is payable for a month only if the deposit is made just before the 5th of that month. Hence, beneath the PPF scheme, interest is calculated each and every month, compounded annually, and is reset each and every quarter.
The catch about PPF is that it comes with a lock-in period of 15 years. The date of maturity when calculating the tenure is not calculated from the date of opening the account. It is as an alternative calculated from the finish of the monetary year in which the deposit was made, irrespective of the month or date in which the account was opened, therefore, it is truly 16 years.
An investor can avail deduction beneath Section 80C of the I-T Act, up to Rs 1.5 lakh, and want not spend tax on component of the earnings that equals the invested quantity. Additionally, the investor also does not have to spend tax on the returns earned in the course of the accumulation phase, or at the time of withdrawal.
Here is how you can get the ideal out of your PPF account:
Industry professionals say one ought to use their PPF account as a retirement savings tool, or for other extended-term objectives such as a child’s larger education, kid marriage, beginning a business enterprise, and so forth. Just aim it towards a purpose, possessing a extended-term viewpoint in thoughts.
One can invest in the account each and every year, from a minimum of Rs 500 to a maximum of Rs 1.5 lakh, beneath Section 80C. An investor with a extended-term purpose ought to deposit the maximum quantity that can be deposited – Rs 1.5 lakh each and every year – if it fits their asset allocation and extended-term objectives.
If you are depositing Rs 1.5 lakh at one go, attempt to deposit it in the initially month of the monetary year, ie, in April, and just before the 5th. It might be noted that the interest is calculated on the lowest balance amongst the 5th and the last day of each and every month. So, if you place your income in the PPF account just before the 5th of every month, your contribution will earn interest for that month also.
Additionally, if you are unable to place in a substantial quantity at one go, you could place the income in 12 instalments, wherein every calls for an investment of a minimum of Rs 500 month-to-month. In this case, also, attempt your ideal to place your income in the PPF account just before the 5th of that month.