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Public Provident Fund (PPF)

If you are looking for an investment scheme that will not only save your money but will also act as a tax saving instrument, we at Nostra Advisors will recommend Public Provident Fund (PPF). In fact if you don't have any specific retirement plan still in place, then it is best to invest in this scheme. One can open the account in the specified post offices or in different banks such as State Bank of India as well as ICICI Bank. The best feature about this scheme is that it is free from tax without any limit. In addition to this one will also get annual tax rebate under Section 80C of income tax. Furthermore the contributions made to PPF accounts of the spouse and children are also eligible for tax deduction.

Individuals who are residents of India can open an account under the PPF scheme. The account may be opened in the individual's name, in case the individual is a minor, the account will be opened by the parent. Only account per person is permissible. This scheme comes with a lock in period i.e. one cannot withdraw money before 5 years. However after maturity, one can withdraw the whole money.

In case of Non-resident Indians (NRIs), they cannot open an account under the PPF Scheme. However there is a provision whereby the resident who becomes an NRI during the 15 years' tenure prescribed under PPF Scheme can avail of the fund until its maturity on a non-repatriation basis.

Salient Features:

  • Interest rate of 8.8% per annum w.e.f. 01.04.2012.
  • Minimum deposit is 500/- per annum. Maximum deposit is Rs. 1,00,000/- per annum
  • The scheme is for 15 years.
  • Investment up to Rs 1,00,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act.
  • Interest is completely tax-free.
  • Deposits can be made in lump sum or in 12 installments.
  • One deposit with a minimum amount of Rs 500/- is mandatory in each financial year.
  • Withdrawal is permissible from 6th financial year.
  • Loan facility available from 3rd financial year up to 5th financial year. The rate of interest charged on loan taken by the subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a. However, the rate of interest of 1% p.a. shall continue to be charged on the loans already taken or taken up to 30.11.2011.
  • An individual cannot invest on behalf of HUF (Hindu Undivided Family) or Association of persons.
  • Ideal investment option for both salaried as well as self employed classes.