Public Provident Fund (PPF)

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Public Provident Fund — also known as PPF — is a popular investment scheme which offers an investment avenue with decent returns coupled with income tax benefits. PPF account holders can invest a maximum of ₹ 1.5 lakh each financial year. Also, they need to deposit a minimum of ₹ 500 in a financial year to keep the account active. A PPF account comes with a maturity period for 15 years, which means your investment is locked in for this period.

Deposits can be made in lump sum or in 12 instalments. PPF deposits qualify for deduction from taxable income under Section 80C of the Income Tax Act. In terms of income tax implications, PPF qualifies for the EEE (exempt, exempt, exempt) tax category, which means an investor is not liable to pay tax at all three levels – investment, earning and withdrawal.

1. The rate of interest for PPF is determined by the central government on quarterly basis. At present it is 7.10 per cent per annum.

2. Partial withdrawal from PPF account is allowed every year from seventh year from the year of opening account. The maximum withdrawal amount allowed is capped at 50 per cent of the balance at the end of the fourth year immediately preceding the year of withdrawal or the amount at the end of the preceding year, whichever is lower.

3. The original maturity period of a PPF account is 15 years and it can be extended in blocks of five years.

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