September 26, 2012
All about PPF account (Personal Provident Fund)
Santanu Debnath Money Matters
PPF means Public Provident Fund, this is a long term investment scheme from Govt of India. Provident fund is a very common term for all salaried person. Generally employment organisations control the Provident fund that we know. In your salary slip you can notice a deduction in the name of PF deduction.
Actually there are couple of types of Provident fund accounts. They are : General Provident fund (GPF), Employee Provident fund (EPF) and Public Provident fund (PPF).
First 2 are not controlled by us, as we all pay 12% of our basic salary towards PF deduction every month. If you are in a private sector company, then in the name of EPF and if you are in Govt sector, then in the name of GPF. But in case of PPF, you can have the control in your hand. Means it's not mandatory like the first 2. If you need a PPF account you can open it yourself, otherwise don't open.
How to open a PPF account?
Right now India you can open a PPF acocunt in post offices and few autharised Bank (SBI, ICICI etc). The account has a locking period of 15 years. You can also extend further by 5 year after maturity of your PPF account.
As per Indian Govt rules, you can deposit maximum of Rs 1,00,000/- every year and minimum Rs 500/- to keep the account active. You can easily open an account and deposit money by cash/draft/net banking etc.
Current Interest Rates ?
The current PPF account interest rate is 8.8% w.e.f 1st April'2012. It was increased recently from 8.6%. The interest is calculated for a calender month on the basis of lowest balance in the account between the close of 5th day of the month to end of the month. But the interest rates has been changed couple of times in the last few years.
Loan & Tax Benefit options :
As per section 80C the amount invested in PPF account for a financial year can be tax exepted. In fact on maturity you don't have to pay tax on interest earned as well.
You can take loan from your PPF account from the 3rd financial year, excluding the year of deposit. On your current balance you can take max 25% loan.
Investing in PPF account for a long term purpose will always return a corpus amount as the locking period is very lengthy. So after 15 year you can expect a huge amount to secure your future. In the same time this is a completely risk free investment as it's not linked with share market.