PPF account is one of the best and
safe investments for an individual. A government-guaranteed fixed income
security, this is very apt as a long-term savings instrument. Yearly
subscriptions can be as low as Rs. 500 to as high as Rs. 1,00,000.
It counts being among the most
secure investments you can have in this country. The interest earned on the PPF
subscription is compounded; that means you not only earn interest in the money
you put in, but you earn interest on the interest earned too. All the balance
that accumulates over time is exempt from wealth tax.
A
flip side, its an extremely illiquid investment instrument. Its lengthy lock-in
period works out to 16 years since the last contribution is made in the 16th
financial year. In all, the PPF is a very good savings instrument, and you
should consider investing in it.
- Ideal investment option for both salaried as well as
self employed classes.
- Investment up to INR. 1,00,000 per annum qualifies for
IT Rebate under section 80 C of IT Act.
- The rate of interest on the subscriptions made to the
fund on or after 01.12.2011 and balances at credit of the subscriber in
the existing PPF account shall bear interest at the rate of eight point
eight per cent (8.80%) per annum.
- Loan facility available from 3rd financial year upto
5th financial year. The rate of interest charged on loan taken by the
subscriber of a PPF account on or after 01.12.2011 shall be 2% p.a.
However, the rate of interest of 1% p.a. shall continue to be charged on
the loans already taken or taken up to 30.11.2011.
- Withdrawal permitted from 6th financial year.
- Free from court attachment.
- An individual cannot invest on behalf of HUF (Hindu
Undivided Family) or Association of persons.
An
example is shown below describing, if an individual invest Rs 1,00,000/ year,
then in 15 years he will have an amount of Rs 30.64 lakhs. The interest portion
is completely tax free. Principal portion can be claimed as a deduction under
Sec 80C.
Year
|
Principal
|
YoY investment
|
Interest
|
P+I
|
1
|
1,00,000
|
-
|
8,500
|
1,08,500
|
2
|
1,08,500
|
1,00,000
|
17,723
|
2,26,223
|
3
|
2,26,223
|
1,00,000
|
27,729
|
3,53,951
|
4
|
3,53,951
|
1,00,000
|
38,586
|
4,92,537
|
5
|
4,92,537
|
1,00,000
|
50,366
|
6,42,903
|
6
|
6,42,903
|
1,00,000
|
63,147
|
8,06,050
|
7
|
8,06,050
|
1,00,000
|
77,014
|
9,83,064
|
8
|
9,83,064
|
1,00,000
|
92,060
|
11,75,124
|
9
|
11,75,124
|
1,00,000
|
1,08,386
|
13,83,510
|
10
|
13,83,510
|
1,00,000
|
1,26,098
|
16,09,608
|
11
|
16,09,608
|
1,00,000
|
1,45,317
|
18,54,925
|
12
|
18,54,925
|
1,00,000
|
1,66,169
|
21,21,094
|
13
|
21,21,094
|
1,00,000
|
1,88,793
|
24,09,887
|
14
|
24,09,887
|
1,00,000
|
2,13,340
|
27,23,227
|
15
|
27,23,227
|
1,00,000
|
2,39,974
|
30,63,201
|
Invest in PPF and enjoy the benefits.