PPF: Savings cum tax saving investment; Know latest rules
PPF is one of the greatest long-term investment solutions with competitive interest rates and returns for those who have a limited tolerance for risk.
It is also known as a tax-saving investment strategy that also offers assured returns. PPF is a government-sponsored programme that enables you to build a lump sum retirement fund. Due to the set returns, it also serves as a tool for portfolio diversification and offers tax advantages for the investor.
Rules Changed for PPF
Premature Account Closure: PPF accounts can now be prematurely closed if your residency status switches from resident to non-resident, in addition to the preceding instances of premature closure under particular conditions requiring a need for money. This requires the submission of documentation such a passport, visa, or tax returns.
Account Extension: Form 4 must be submitted after maturity in order to extend it. Extensions are possible in 5-year blocks. Without adding new money, PPF accounts can be kept after maturing and the remaining balance can generate interest at the applicable rate. Within a year of the original or extended account’s maturity, you should submit an extension request.
Account Deposits: There is currently no cap on the quantity of deposits. You may deposit in multiples of Rs. 50, but the minimum amount should be Rs. 500 and the annual maximum cannot be more than Rs. 150,000.
Interest on Loan Against PPF: The cost of a loan against a PPF has decreased because the government dropped the interest rate from 2% to 1% (over the current interest rate on PPF).
Loan Payment Terms: The loan must be paid back within 36 months. Failure (whether partial or complete) carries a 6% annual penalty interest charge. Additionally, a second loan cannot be arranged until the previous debt is paid off.
Features of PPF
1. Minimum tenure of 15 years.
2. Interest Rate of 7.1% compounded annually.
3. Minimum investment of Rs.500 and maximum of Rs.1.5 lakh for each financial year.
4. Mode of Deposit Can be made either by way of cash , cheque , DD or through online fund transfer.
5. At least once every year for 15 years.
6. Low risk factor involved with risk free returns.
7. Tax Saving Benefit Up to Rs. 1.5 Lakh under section 80C.
PPF continues to be a tax-saving investing choice even with the new rules. It was created with the intention of attracting small deposits through investment and return. Therefore, PPF is undoubtedly a safe investment option for anyone wishing to reduce their tax burden while earning assured profits.