At the beginning of a new financial year, it is beneficial for a smart investor to save tax while investing in highly rewarding investments. Many investment options offer tax savers income tax deductions, with some of the most common deductions falling under sections 80C, 80CCC, and 80CCD. Consequently, by devising a better tax-saving strategy, one can optimize the returns from one’s investment choices. With the financial year 2022-23 approaching, it is a good idea to invest in tax-saving instruments at the earliest to build a healthy corpus for your financial health. As a result, investors who want to save tax while earning risk-free returns can consider investing in Public Provident Fund (PPF), which is a mainstay among tax-saving investors.
tax free deposit
Public Provident Fund Account (PPF) has a tenure of 15 years, which makes it a suitable savings plan for long-term investors, especially those planning for retirement or girl’s wedding. PPF account can be opened with minimum deposit amount 500 and maximum amount 1,50,000 every financial year. An account can be opened in any post office or bank only by an adult who is a resident Indian or is a guardian on behalf of a minor or a person of unsound mind. PPF account holders can avail tax benefits under section 80C on deposits up to 1.5 lakh, allows tax-saving investors with less tax regime to benefit from PPF.
tax free return
The interest rate on PPF is 7.1 per cent per annum, compounded annually, and is calculated on the lowest amount in the account between the fifth day in a financial year and the end of the month, so you need to deposit every month in your PPF account. Before 5th of every month. Interest will be credited to the account at the close of each financial year as the rate of interest is compounded annually. Although the interest earned is tax-exempt under the Income Tax Act, the accumulated amount and interest are also tax-exempt.
Tax free withdrawal and maturity benefit
PPF accounts have a maturity period of 15 years, and on maturity, one can withdraw the maturity amount, maintain the maturity amount in the account without depositing it, and the PPF interest rate as applicable or extend his account for any other block Can do. Five years, and so on. When it comes to withdrawals, the customer can make a withdrawal after five years of account opening, and withdrawals can be made at the end of the fourth preceding year or up to 50% of the total balance at the end of the previous year, whichever is is less. Section 80C of the Income Tax Act exempts full or partial withdrawals from PPF account from taxation, which is another reason to invest in a PPF account for those who are looking for EEE tax benefits. As the amount invested in the scheme is tax-free 1.5 lakh in each financial year, interest received is tax-free, and maturity benefits are also tax-free, PPF is a popular tax-saving option that comes with Long Term Exemption (EEE) tax-saving status.