Public Provident Fund Account (PPF) is flexible, affordable and available to all Indian residents. A guardian can also opt for PPF on behalf of the minor. The account offers 7.1% interest rate which is compounded annually. Investing in PPF can start with as little as 500 and up to max 1.5 lakh in a financial year. The scheme also offers various tax benefits. Whereas, PPF is actually a very safe, guaranteed return and small savings investment. However, to earn more income, it is better to deposit before 5th of every month. Currently, the next best time frame for depositing in PPF would be between April 1 and 5.
This scheme can be opened in post office or bank all over India.
As per the guidelines of the Ministry of Finance, interest in PPF accounts is calculated on the minimum balance in the account between the end of the fifth day for the calendar month and the end of the month.
Also, interest on PPF balance is calculated every month but becomes payable at the end of a financial year. Simply put, the interest will be credited to the account at the end of each financial year where the account is at the end of the financial year.
That is, it is better to invest in PPF account before April 5 to get maximum interest. Even for monthly investments, it is better to deposit your money in the PPF account before the fifth of every month, as the interest is calculated on that date. Fifth of every month on the balance.
Therefore, by depositing in PPF between the 1st to 5th of every month, the account holder gets an opportunity to increase his income. If the investment is made through cheque, one must ensure that it is done in such a way that it is cleared before the 5th of the month.
Notably, the interest earned on PPF accounts is also tax free under the Income Tax Act. In addition, the deposit qualifies for 1.5 lakh tax benefit under section 80C of the IT Act.
Under PPF, the amount can be deposited in any number of installments in a financial year in multiples of up to 50 and max 1.50 lakhs.
Loan facility is also available in PPF. The loan can be taken from the end of the financial year after the end of one year of the PPF account in which the initial subscription was made.
The maturity period of PPF account is 15 years. An account holder can extend his PPF for a further block of 5 years (within one year of maturity) by submitting the prescribed extension form at the concerned post office.
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