Here are 10 features of public provident funds (PPF) you should be aware of:
1) PPFinterest rate: PPF accounts offer an interest rate of 7.6 per cent per annum. The interest rates on small savings schemes like PPF are decided every quarter by the government.
2) Payment of interest: Interest on PPF deposits is paid on March 31 every year. The interest for the month is calculated on the minimum balance available in the account from the fifth of a month to the last date of the month. “Suppose you want to deposit Rs. 12,500 every month in 10 instalments. If you deposit before 5th of every month, you earn extra monthly interest of close to Rs. 79 and for 10 months it would help you to earn Rs. 792 more, at the current interest rate of 7.6 per cent. This could be more than one-eighth of the interest you earn for the whole year. Even a one-time deposit before April 5th, 2018 will earn interest for the whole year,” explained Dinesh Rohira, Founder and Chief Executive Officer, 5nance.com.
3) Income tax benefit: Interest income on PPF accounts is completely tax-free. PPF accounts enjoy the status of being exempt, exempt, exempt or EEE. This means that your contribution, interest income and maturity proceeds on PPF accounts all have zero taxes.
4) Maturity period: A PPF account matures in 15 years. However, it can be further extended within one year of maturity for further five years and so on.
5) Premature closureof PPF accounts: Premature closure of PPF accounts is not allowed before the period of 15 years.
7) Loan against PPF accounts: Customers can avail a loan facility on PPF accounts from the third financial year.
8) Investment amount: One cannot deposit more than Rs 1,50,000 a year in PPF accounts. The minimum amount required to be deposited within a year is Rs 500.
9) Where to open PPF accounts: PPF accounts can be opened in a bank branch or post offices. These days, some banks, also allow the opening of PPF accounts online.
10) Nomination facility: A nomination facility is available at the time of opening of PPF accounts and also after opening of the account.