Public Provident Fund (PPF) Account - Retirement & Tax Planning

FaceBook Twitter

Public Provident Fund, popularly known as PPF, is great instrument for risk-averse investors. It is also an excellent tool for long-term wealth creation, mainly for goals that need relatively safe investments. You can invest in it and get a deduction on your income. Moreover, you can earn the tax-free interest on it. It is also very secure since Government of India runs this scheme. You can be confident that nobody is going to run away with your money. For many of those who do not have any structured pension plan covering them, PPF also serves as a retirement planning tool. Throughout the country, Public Provident Fund account can be opened at nominated post offices and at designated branches of Public Sector Banks.

Features and benefits of Public provident fund (PPF):

Multiple Income Tax Benefits
Great Interest Rate
Facility of Withdrawals
Facility of Loan
Extension Possible
Long Term Investment
Absolute Safety
Nomination Facility Available
Low Minimum Investment
Default
Regular Investments

How to open a PPF account?

For opening a PPF account, visit State Bank of India branch. You can open an account at subsidiary banks of SBI Bank. You can visit at any nationalized bank in your neighborhood; selected branches of nationalized banks can also open accounts. You can also open PPF accounts at the head post office or selection grade sub-post offices. Go to the official website of SBI; take a look to download the form. Fill up the form, attach a photograph and submit your Permanent Account Number. Furnish an attested copy of your ration card, voter’s identity card or passport, if you do not have a PAN. After opening an account, you will get a passbook in which all subscriptions, interest accrued, withdrawals and loans are recorded.

You can keep only one PPF account in your name, if you have two accounts then the second account will be closed at any point and you will be refunded only the principal amount, not the interest. You cannot open a joint account with another person. The account can only be opened in name of one person and you are free to nominate one or more individuals. On the account holder’s death, nominees cannot access that account which was made by their contributions. The legal heirs get the money, in the case when account holder has not nominated anyone. Person can open one account for himself and others for his child/children.

How it helps in Retirement?

PPF is a good retirement fund, due to its safe in Govt. It gives compound return of 8.5% every year. It keeps some money safe but the return is normally equals to inflation. In PPF, the partial withdrawal is after 5 years and it will mature after 15 years and you can also continue after 15 years. Any account holder who is retired early due to ill health or who is over their normal retirement age will receive 100% of the pension they are currently receiving.

How to do tax planning with PPF?

For the current year, most taxpayers approach their tax-saving investments with the sole objective of saving tax. An employee’s provident fund contribution, tuition fees paid for children, principal portion of housing loan installments, investments made in public provident fund (PPF), equity linked saving scheme (ELSS), national savings certificates (NSC), senior citizen savings scheme, post office term deposits, life insurance premiums paid, etc are included in the long list of eligible investments.

First, take into account mandatory payments such as provident fund, housing loan EMIs and tuition fees, if applicable. Decrease the total amount spent from the Rs 1 lakh limit. In a combination of ELSS and PPF, distribute the balance. Put 70% into ELSS and 30% into PPF, if you are relatively young and just starting out. As you go forward, increase the PPF and lower the ELSS, eventually reaching a 30% ELSS and 70% PPF combination. PPF is the best-fixed income investment that you can make. In 20 years, an annual contribution of Rs 70,000 will get you around Rs 32 lakh. It can become a fund for the education needs of your children or you would have a retirement fund ready.

You Might Also Like :

ShareThis : FaceBook Twitter MySpace GBuzz Google Email More

Read More About :

PPF is similar to PF with the

Anonymous — Thu, 07/01/2010 - 02:46

PPF is similar to PF with the only difference being, anyone can open a PPF account by visiting the nearest State Bank of India branch. PPF is also managed by the government of India. Once we open a PPF account we can deposit cash in our PPF account anytime. There is one restriction here. We must deposit at least Rs. 500/- every year to keep our PPF account active. The maximum amount we can remit in our PPF account every year is Rs. 70,000/- Our PPF account remains active for 15 years and if we want we can extend it by a further 5 years. We cannot encash the entire amount in our account before the tenure of 15 years. Of course we can do partial withdrawals from our account but we cannot take out the entire corpus.