What is Public Provident Fund (PPF)

Public Provident Fund (PPF) is a scheme of the Central Government of India for the investment which not only generates guaranteed returns but also gives tax rebate under section 80C of Income Tax Act. PPF account can be opened for a minimum period of 15 years and can be extended indefinitely in block of 5 years.

PPF is very popular investment instrument among all the money-saving avenues available for investment due to its flexible nature. The balance lying in PPF account is not subject to attachment under any order or decree of court.

Interest Calculation in PPF Account

PPF interest is calculated at the prevailing rate on monthly basis on the lowest balance between the end of the 5th day and last day of month but the total interest for the whole financial year is credited to PPF account only once i.e. at the end of financial year.

Interest earned on the PPF account is fully exempt from tax under Section 10 (11) of the Income Tax Act.

Benefits of PPF Account

1. Guaranteed Returns: Maximum Investment Amount of Rs 150,000 per year
2. Available for long Tenure: Public Provident Fund (PPF) is a long term investment option for 15 years
3. Interest Rate is fixed: Presently 8.00% p.a. effective from 1 October 2018
4. Compounding of Interest: Interest Rate is compounding annually
5. Tax Free Returns: Interest earned is not taxable
6. Income Tax Rebate: Income Tax Rebate u/s 80C is available, up to Rs 1,50,000/- p.a.
7. Tax Free Maturity: Tax Free maturity is available
8. Premature Withdrawal is allowed: Only partial amount, after the 5th year and subject to a limited extent only
9. Loans Availability: Loan from third year onwards is available
10. No TDS: No Tax Deduction at Source (TDS) made under PPF Account
11. Safety: It is the Safest Investment
12. Renewal/ Extension of PPF Account: A PPF Account can be renewed/ extended within 1 year of maturity for further 5 years and so on in the block of 5 years indefinitely
13. Transfer Facility: PPF Account can be transferred to any bank or post office
14. No Attachment: PPF funds can never be attached under court order or cannot be claimed by creditors
15. Nomination Facility: It is provided by a PPF Account