BENEFITS OF PPF ACCOUNT

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.