Saving money for the future is essential. Apart from helping secure your finances, it also helps you prepare for the unexpected. One of the ways you can do this is by earning a tax-free interest with a public provident fund (PPF).
One of the more popular ways that people save is by getting tax exemptions and tax deductions. Through these, individuals are able to allocate their funding towards more fruitful endeavors which enable them to grow their money in the long run.
Curious to know more about this opportunity and what it can offer? Before you make any decisions, you should learn more about PPFs. Continue reading to find out more about PPFs and how they can help you save.
What Is A Public Provident Fund?
For individuals who are thinking about investing their hard-earned money, a Public Provident Fund (PPF) is definitely a great choice. However, to truly explore the benefits and possible risks that come with this, it is essential to learn what this is and what it offers.
First off, a Public Provident Fund is a long-term investment option supported by the government of India. It is an initiative that allows Indian citizens to invest while saving money with its tax-free interest. Not to mention, a PPF also affords investors attractive and competitive interest rates that allow them to grow their money.
Under this initiative, employees and workers who wish to participate are required to provide a portion of their earnings as a contribution to the fund. In the same way, employers are enacted to contribute a percentage on behalf of their employees. The amount obtained from the respective individuals and entities will go to a collective pool, which will then be managed by the government.
The money, held in private accounts in different banks of their choice, will be grown by the respective agencies. A PPF is often used by individuals preparing for their retirement or preparing for their future in general. They have a 15-year maturity.
Benefits Of A Public Provident Fund
One of the main perks of the PPF is its ability to provide multiple tax benefits, filed under its exempt-exempt-exempt (EEE) status. In fact, it is considered as one of the safest investment options, especially as the government of India guarantees your investments. Moreover, the government also sets the interest rate, making sure that you get the best rate for the fund.
Speaking about interest rates, keep in mind that this investment comes with financial responsibilities. When you decide you invest in the PPF, you will need to pay Rs. 100 to open your account. You also need to pay an interest rate of 8%, compounded annually.
You can invest a minimum of Rs. 500 and a maximum of Rs. 1,50,000 within a financial year in a lump sum or by a maximum of 12 installments. As mentioned, the minimum tenure of the PPF is 15 years. Additionally, you can take loans between the 3rd and 5th years of your investment. Should you wish to make withdrawals, keep in mind that you can do so after the 7th year, but only for emergencies.
If you are an Indian citizen, you can definitely apply for an account. To start, you only need to fill out the application form. When doing so, make sure that you have the required documents on-hand. This includes KYC documents, proof of identity, your address and your signature. Upon approval, you can deposit the opening balance.
Bear in mind that joint accounts will not be entertained for adult citizens. However, you can start a joint account if you are an adult opening one for your children. This also applies for court-appointed guardians who wish to open accounts for minors.
Getting Tax-Free Interest From The PPF
When you open a PPF account, you have the benefit of tax-free interest. You can enjoy this advantage by depositing an annual amount of not more than Rs. 1,50,000. Remember that any amount over Rs. 1,50,000 will not earn interest and, thus, will not be qualified for the tax savings program.
The Public Provident Fund is a valuable investment option for any Indian citizen. With the guarantees and rates set by the government of India, you can rest assured that your money will be placed in a fruitful and reliable investment vehicle.