Throughout the years Public Provident fund has remained to be a favorite investment option for many investors due to the safety of investments and hefty returns. It is also an attractive option for the ones whose motive is to get an income tax deduction. Apart from the deduction benefits on income tax while filing returns, PPFs can be considered a great investment option for retirement plans.
One needs to know about PPF, one of which is how one can earn maximum interest from a PPF account. So let’s take a look at all that we need to know about this beneficial tax-saving investment.
What is PPF?
PPF or Public Provident Fund is a very prevalent long-term investment selection which features the safety of the principal invested with an attractive interest on the amount of investment, both of which are exempted from tax. The minimum amount invested in a PPF in one financial year is Rs. 500, whereas the maximum amount that can be invested stands to be Rs. 1, 50,000. One can get more advantages like loan, withdrawal, and extension on the PPF tenure. PPF is usually an investment scheme of 15 years.
How to Open A PPF Account?
PPF Account can be started at any designated bank branch by anyone. There is no such eligibility criterion regarding who should own a PPF account. One may as well apply online.
The following things are required to open a PPF account:
- Get an idea proof. It may be your driving license, Voter Card, PAN Card, or Aadhaar Card.
- An address proof. It may be your telephone bill, ration card, or electricity bill.
- Two current photographs
Pay-in-slip that would be required to transfer the amount to your PPF account.
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More about PPFs
- A PPF account can be started online, and A few banks have an option for the same
- There is no age limit, and anyone is eligible to open a PPF account
- The maximum number of times one can deposit in a PPF account in a year is 12. One must deposit before the 5th of every month to get an interest for the full month. In case you happen to deposit the amount after the 5th of any month, the interest shall be calculated on the lowest balance from the credit of an account from the close of the 5th till the end of a month.
- The interest rate is attractive enough, providing interest of 7.6% on the deposit, which is completely exempted from income tax.
- One may opt for a loan in between the 3rd and 6th financial year. A partial withdrawal facility can also be availed by the investor 7th year onwards.
- After a lock-in period of 5 years, the account can be extended too.
- Withdrawals from the PPF account- After the 5th year, the investor is eligible to withdraw 50% of the last year’s deposit or the 4th year’s deposit preceding the withdrawal date. A loan taken against your PPF has a factoring effect which reduces the balance.
One has to apply with form C for any withdrawal. Also, one cannot withdraw more than once a year.
Ways to Maximise Interest Earned From Your PPF Account
The following are a few points to be kept in mind to earn the maximum interest out of your PPF account:
- Know when to deposit in your PPF account- A PPF holder needs to know when it is the right time to deposit in his/her PPF account. First of all, the investor needs to make regular deposits in the PPF account like any SIP or mutual fund—next, you how interest is computed on your deposits. Interest is computed on the least credit balance between every 5th and 30th/31st of the month, which implies that the deposit to the PPF account is better made by the 5th of every month to avail the full month’s interest.
- Invest a lump sum amount before 5th April- Investing a lump sum amount at the start of every financial year can help you earn maximum interest on your PPF account as quite a hefty interest would be accrued to the investor on the whole of the lump sum amount by the end of the year. The maximum limit up to which the PPF holder can deposit is 1.5 Lakh, and the entire amount would be subjected to Income Tax Benefits according to Section 80C of the Income Tax Act.
- Use the online system for the transfer- There are quite several banks offer an online service for opening a PPF account. The investor should opt for an online service rather than go to the bank and deposit the amount manually. This will ensure that the account holder deposits the money before the 5th of every month to get the full interest for the month without approaching a bank and going through the tiring deposit procedures.