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Business News/ Money / Personal Finance/  What is a Public Provident Fund and its features?

What is a Public Provident Fund and its features?

Public Provident funds or PPF are one of the best government backed long term investment options for people who are looking for retirement saving schemes. It also helps you save taxes under section 80C. To learn more, keep reading.

PPF is a most popular low-risk saving scheme run by the Government of India. (Image by Megan Rexazin from Pixabay)Premium
PPF is a most popular low-risk saving scheme run by the Government of India. (Image by Megan Rexazin from Pixabay)

A Public Provident Fund can be referred to as investment-cum-tax saving scheme. The Central Government runs the scheme and ensures guaranteed returns over the amount deposited by the investors. The amount deposited under the scheme is entitled to income tax deduction under Section 80C.

The investors need not also worry about the tax on income earned from the fund as the scheme falls under Exempt-Exempt-Exempt (EEE) category. The PPF account can be opened with any post office or a national bank or even some private banks as well. A key feature of PPF is that it can be transferred from post office to bank or vice-versa. However, it is vital to note that PPF does not allow joint or multiple accounts.

Who should invest?

The scheme is quite relevant for investors who want to get high returns from a low-risk investment. And the investors who seek tax exemptions from their investments should consider PPF seriously as it falls under the EEE category.

PPF takes 10 years to double
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PPF takes 10 years to double

Key Features

  1. PPF comes with a lock-in period of 15 years. An investor cannot withdraw the amount prematurely, but those in desperate need can withdraw some amounts after seven years i.e., on completion of six years. The scheme allows withdrawal in the case of the demise of the account holder.
  2. The interest rate for PPFs is calculated every month and added to the amount at the end of every fiscal year. The interest rates for the PPFs are decided by the Government of India after every quarter. Currently, it is 7.1% p.a. (for the quarter 1st July - 30th October 2021)
  3. The minimum deposit required is Rs 500 annually and the Maximum deposit being Rs 1,50,000 in a financial year.
  4. PPF account allows the investor to take a loan against their PPF account. The only condition which comes up is that the loan can only be taken from the start of the third year till the sixth-year end.
  5. Nomination is allowed under PPFs account to one or more person(s). If the nomination is shared among two or more people, the division of their share needs to be specified.
  6. The PPF account can be extended in the block of five years and filling a form named Form H.
  7. A PPF account requires the investor to at least make a deposit once every year till the maturity of the account, i.e., 15 years
  8. The attractive feature of the scheme is that it is backed up by the Government of India, making the risk minimal and the capital secured.

The Public Provident Fund is the best long-term investment option for people who want to earn a steady interest for an uncertain future. One of the key features of the scheme is that it offers a good rate of interest. Even though the terms of withdrawal seem a little edgy, the revenue at the end of the maturity period is worth the wait. The scheme is definitely a safe option as it is fully backed up by the Government of India, making it an ideal investment option for investors with low risk appetite.

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Published: 14 Feb 2022, 12:34 PM IST
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