How to Earn Maximum Interest from your PPF Account

Throughout the years Public Provident fund has remained to be a favourite 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 looked at as a great investment option for retirement plans.

There are certain things that 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 very useful tax-saving investment.

What is PPF?

PPF or Public Provident Fund is a very prevalent long-term investment selection which features safety of the principle invested with an attractive interest on the amount of investment, both of which are exempted from tax. The minimum amount that can be 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 licence, 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 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 times one can deposit in a PPF account in a year is 12. One must deposit before 5^th of every month to get an interest for the full month. In case you happen to deposit the amount after the 5^th of any month the interest shall be calculated on the lowest balance from the credit of an account from the close of 5^th till the end of a month.
• The interest rate is attractive enough providing an interest of 7.6% on the deposit which is completely exempted from income tax
• One may opt for a loan in between 3^rd and 6^th financial year. A partial withdrawal facility can also be availed by the investor 7^th year onwards.
• After a lock-in period of 5 years, the account can be extended too.
• Withdrawals from the PPF account- After the 5^th year, the investor is eligible to withdraw 50% of the last year’s deposit or of the 4^th 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 so as to earn the maximum interest out of your PPF account:

• Know when to make a deposit in your PPF account- It is important for a PPF holder to know when it is the right time to make a 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 in computed on the least credit balance between every 5^th and 30^th/31^st of the month which implies that the deposit to the PPF account is better made from by 5^th of every month to avail full month’s interest.
• Invest a lump sum amount before 5^th 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 Income Tax Act.
• Use online system for transfer- There are quite a number of banks that offer an online service of opening a PPF account. It is advisable for the investor to opt for an Online service rather than going to the bank and depositing the amount manually. This will ensure that the account holder deposit the money before 5^th of every month so as to get the full interest for the month without having to approach a bank and go thorough the tiring deposit procedures.