A good news for people bent on investing in Public Provident Fund (PPF), from 1.12.2011 the limit of maximum investment of Rs.70,000 per year has been increased to Rs.1,00,000. Another announcement from Ministry of Finance dated 25.11.2011 says that interest rate on PPF subscriptions after 1.12.2011 will be 8.6% p.a. - not a bad rate considering the tax saving option also which PPF provides.
The natural question to all of us will be why PPF? I recommend PPF for long term investment. The following are its features :
- Minimum investment per year is Rs.500 subject to a maximum Rs.1,00,000 (from 1.12.2011 - earlier Rs.70,000)
- The account can be opened with Post Offices and notified Scheduled Banks
- Tax benefit under section 80C of the income tax act, also interest accrued is exempt from tax.
- Withdrawals from PPF is also exempt from income tax - this adds much to the flavour
- The only flip side is one has to be invested for 15 years, but there are some ways of withdrawing before 15 years as explained in the subsequent points
- After expiry of 5 years from the date of initial subscription an amount equal to 50% of balance outstanding as on end of the 4th year is allowed as a withdrawal
- Loans also can be taken from this account from the end of 1 year from initial subscription, interest on loan is 2% p.a. from 1.12.2011 (earlier 1% p.a.)
- Nomination facility is available for PPF
Some do's and don't of PPF
- Treat this as a long term investment and invest regularly do not withdraw or take loan unless it is absolutely necessary
- PPF cannot be opened in the name of a HUF
- PPF can be opened in the name of a minor by either of the parents (not both)
Thank you Sara. This helped me so much.
ReplyDeleteAlso, one question. I have an account for my daughter who is a minor. Can I invest INR 1L in her account and INR 1L in mine?
Please advice
Hai
ReplyDeleteIn Public Provident Scheme 1968, Paragragh 3 reads as follows :
3. Limit of subscription:- (1) Any individual may, on his own behalf or on behalf of a minor of whom he is the guardian, subscribe to the Public Provident Fund (thereafter referred to as the fund) any amount not less than Rs. 500
and not more than Rs. 70,000 in a year.
The above Rs.70,000 has been increased to Rs.100,000 vide notification dated 25.11.2011
In short, you can have 2 accounts one in your name and another in your daughter's name. Each are separate accounts and each account can have an investment of Rs.1 lac per year.
Regards
S Saravanan
how much investment can be done in ppf account of NRI opened before becoming NRI.
ReplyDelete