Need a information regarding PPF.?



I wish to have some clarification regarding the PPF.
1. If i start a PPF account , do I have the option of depositing money quarterly basis, yearly or monthly?
2. If I am starting with 1000, can I increase or decrease the amount I am depositing in PPF in the following months?

2 Replies to “Need a information regarding PPF.?”

  1. Public Provident Fund (PPF) is a long-term savings plan with powerful tax benefits. Your money grows @ 9.5 per cent per annum, and this is guaranteed by the Government of India (GOI). You may consider this option if you are not looking for short-term liquidity or regular income. Normal maturity period is 15 years from the close of the financial year in which the initial subscription was made.

    Maturity values for your PPF account depending on what you invest each year

    HOW YOUR MONEY GROWS IN A PPF ACCOUNT Amount Invested Per Annum Amount Received After 15 Years*
    Rs 100 Rs 3,771
    Rs 5,000 Rs 188,567
    Rs 10,000 Rs 377,135
    Rs 15,000 Rs 565,702
    Rs 30,000 Rs 1,131,405
    Rs 45,000 Rs 1,697,107
    Rs 60,000 Rs 2,262,810

    * Return offered is 9.5% per annum

    INVESTMENT OBJECTIVES

    How suitable is a PPF account for an increase in my investment?

    A PPF account is not aimed at generating capital appreciation since it has no secondary market. It is mainly suitable for long-term saving and for availing of tax incentives. The lump-sum amount that you receive on maturity (at the end of 15 years) is completely tax-free.

    Is A Public Provident Fund account suitable for regular income?

    PPF does not provide any avenues for regular income. It provides for accumulation of interest income over a 15-year period, and the lump-sum amount (principal + interest) is payable on maturity.

    To what extent does a PPF account protect me against inflation?

    A PPF account does not provide protection against high inflation. In certain years when the inflation rate is high, the real rate of return on your PPF may be marginal. This depends on the prevailing rate of interest on your PPF at any given time. These rates are notified by the GOI in the Official Gazette from time to time, and are calculated in such manner as is specified in the scheme.

    Can I borrow against my PPF account?

    Yes, loans can be availed of from the third to sixth year @ 1 per cent per annum if repaid within 36 months. Else, interest on loan is set at 6 per cent per annum. Amount of such loans will not exceed 25 per cent of the amount that stood to your credit at the end of the second year immediately preceding the year in which the loan is applied for. You will continue to earn interest at the specified rate on your balance in the PPF Account after availing of the loan facility.

    RISK CONSIDERATIONS

    How assured can I be of getting my full investment back?

    Your principal is assured. The PPF Scheme has the backing of the GOI, and is considered completely risk-free.

    How assured is my income?

    Since the PPF Scheme is backed by the GOI, your interest income is assured.

    Are there any risks unique to PPF scheme?

    No, you can safely put your money in a PPF Scheme as it is risk-free. Although factors like inflation and interest rate fluctuations may determine whether you opt for a PPF Account or not, the decision to invest in a PPF Account is based on the twin benefits of long-term savings and tax incentives.

    Please note that if the government reduces interest rates and you are already operating an account, then the new interest rates will be applicable to your account. Subsequent interest calculations will be on the new rate of interest.

    Is the PPF scheme rated for their credit quality?

    No, since the PPF Scheme has the backing of the GOI, it does not require any commercial rating.

    BUYING, SELLING, AND HOLDING

    How do I open a PPF account?

    A PPF Account can be opened in any Head Post-Office, GPO, any Selection Grade Post Office, any branch of the State Bank of India, and selected branches of other nationalised banks.

    What is the minimum investment and range of investment for maintaining a PPF account?

    The minimum investment in a PPF account is Rs 100 per annum for each year of the Scheme. The maximum prescribed contribution is Rs 60,000 per annum. The highlight of the scheme is that you can vary your investments between Rs 100 and Rs 60,000 every year in multiples of Rs 5. The maximum number of instalments in a year is 12. No fixed investment in required.

    What is the duration of a PPF scheme?

    The duration of a PPF account is 15 years, i.e., 15 complete financial years. If a person opens a PPF account on February 9, 2001, the account will mature on April 1, 2017. Even after the expiry of 15 years, the PPF Account can be extended for a duration of five years at a time.

    Can a PPF account be sold in the secondary market?

    No, a PPF account cannot be traded in the secondary market.

    What is the liquidity of my PPF account?

    On expiry of five financial years from the end of the financial year in which the initial subscription was made, you have the facility of one withdrawal every year. The maximum amount available for withdrawal is 50 per cent of the balance at the end of the year immediately preceding the year of withdrawal or the fourth year immediately preceding the year of withdrawal, whichever is lower. For instance, if you have Rs 50,000 at the end of the fifth financial year, and Rs 90,000 at the end of the eighth financial year, you can withdraw upto Rs 25,000 (50 per cent of Rs 50,000). Importantly, there are no penalties for availing of the withdrawal facility.

    How is the market value of my PPF account determined?

    As mentioned earlier, since a PPF Account does not have a secondary market, it cannot be traded. Therefore, the question of market value of a PPF Account does not arise. However, investors can get updates on their account balances from the bank where the PPF account is held.

    What is the mode of holding of a PPF account?

    A PPF Account passbook is issued to the depositor by the bank where the account is held, which can be updated from time to time.

    TAX IMPLICATIONS

    Besides long-term savings, the most attractive feature of PPF is the tax incentives it offers. The interest income earned in PPF and the lump-sum amount received on maturity or premature withdrawal is completely tax-free as per the pro-visions of the Income Tax Act, 1961. The scheme also offers tax benefits @ 20 per cent of the amount invested every year. Thus, on an annual investment of Rs 60,000, an investor can reduce his total tax outgo by Rs 12,000.

    Rebate is calculated @ 30 per cent if your gross annual salary is upto Rs 1,00,000. This also helps to reduce the actual amount invested over a 15-year period. You can also open an account in the name of your spouse or children including married daughters and claim the tax rebate if the contribution is made out of your personal taxable income.






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