Do you have a Public Provident Fund (PPF) account? If it is then it is good, if not then you should open a PPF account soon. PPF is very important for retirement planning. If invested every year in this, then till maturity, a good fund is prepared. Hence it can also be helpful in achieving your financial goal.
PPF is very beneficial in terms of tax
There are many features of PPF. First, you get tax exemption under section 80C of income tax on investment in this. Not only this, but it also offers Exempt-Exempt-Exempt (EEF) benefit. This means that your contribution is not taxed. The interest earned on your deposits is not taxed. Lastly, there is no tax on the total amount received on maturity. There are very few investment options in which the benefit of EEF is available.
You can invest up to Rs 1.5 lakh in a financial year
A maximum of Rs 1.5 lakh can be deposited in PPF in a financial year. You can open a PPF account in a bank or post office. The good thing is that you can deposit money either monthly or annually. You can claim deduction on the amount deposited in PPF while filing income tax return every year. This will reduce your tax liability.
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Interest rate of PPF is also attractive
At present, the interest rate of PPF is 7.1 percent. This is higher than the interest rate of other government investment schemes. The returns from other schemes including KVP are much less than this. Second, you can open a PPF account even with a small amount. The condition is that you have to deposit at least Rs 500 in it every financial year. You have to deposit money in it for 15 consecutive years. Then your account matures.
Follow this method for higher returns
First of all, if you have not opened PPF account yet, then open it between 1st to 4th of any month. It is most beneficial to open an account from 1st to 4th in the month of April. But, you have missed this opportunity. So you can open the account from 1st to 4th of the next month. If the account is opened after April 4, the calculation of interest is done from the next month i.e. May.
There is a special method for calculating interest in PPF. Interest is calculated on the minimum balance of the account between the 5th to the last date (30th or 31st) of every month. Then the interest for the entire financial year is credited to the account holder’s account after March 31. So if you put money in PPF account between 1st to 4th of every month then you get more interest.