What are PPF Account Benefits? PPF Advantages

Are you looking for a secure and lucrative investment option to grow your savings? If so, a Public Provident Fund (PPF) account might be the perfect choice for you. PPF accounts are a popular investment tool in India that offer a host of benefits to account holders. In this blog, we will explore the various advantages of opening a PPF account and how it can help you achieve your financial goals.

Benefits of PPF Investment

The benefits of having a Public Provident Fund (PPF) account are numerous and make it an attractive investment option for individuals. Here are some key advantages of opening a PPF account:

1. Tax Benefits

One of the primary advantages of a PPF account is its tax benefits. Contributions made to the PPF account are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakh per financial year. This allows you to lower your taxable income and save on taxes. Furthermore, the interest earned and the maturity proceeds from the PPF account are tax-free, making it an ideal long-term tax-saving instrument.

2. Risk-Free, Guaranteed Returns

PPF is considered one of the safest investment options as it is fully backed by the government of India. The returns on PPF are guaranteed, providing financial security, especially during retirement, with minimum risk involved.

3. Flexibility and Convenience

A PPF account offers flexibility and convenience in terms of contributions. You can invest a minimum of Rs. 500 per financial year, up to a maximum of Rs. 1.5 lakh. These contributions can be made in a lump sum or in installments throughout the year, as per your financial capability. Additionally, PPF accounts can be opened in authorized banks, post offices, and some selected nationalized banks, making it accessible to a wide range of individuals.

4. Loan and Withdrawal Facilities

During the tenure of the PPF account, you can avail of loan facilities against the balance in your account. The loan can be taken from the 3rd financial year up to the 6th financial year. The interest charged on the loan is generally 1-2% higher than the interest earned on the account. Additionally, partial withdrawals from the PPF account can be made from the 7th financial year onwards, subject to certain conditions. These facilities provide a safety net in case of financial emergencies or unexpected expenses.

Also Read: How to Get a Loan Against PPF Account?

5. Long-Term Investment

The PPF account has a lock-in period of 15 years. While this may seem like a drawback to some, it is actually a beneficial feature. It encourages individuals to develop a disciplined approach to saving and investing for the long term. By committing to a long-term investment, you can harness the power of compounding and accumulate a substantial corpus over the years.

6. Premature Closing

While PPF is designed for long-term investment, there is an option for premature closing under certain circumstances. This option allows investors to access their funds in case of life-threatening diseases or critical illnesses of the account holder, spouse, children, or parents. Premature closure is also permitted for funding higher education and in case of a change in residential status.

It’s important to note that NRIs are not eligible for PPF accounts. Premature closure is subject to meeting specific eligibility criteria and providing relevant supporting documents, such as medical reports, admission confirmation letters, or proof of change in residence status.

Paytm PPF Calculator to Calculate PPF

The Paytm PPF calculator is a handy tool provided by Paytm to help individuals estimate their potential earnings from investing in Public Provident Fund (PPF). It allows users to calculate their projected returns based on the investment amount, duration, and prevailing interest rates. The calculator simplifies the calculation process, saves time, and provides users with a clear understanding of their PPF investment’s growth.

Wrapping it up

The various advantages outlined above contribute to the effectiveness of investing in a PPF. PPF stands out as a secure investment choice, protected even from court-ordered debt settlements. The transparency in interest calculation is notable, with the government announcing the rate of interest (ROI) every quarter. The annual compounding of the weighted average of these quarterly rates often yields a higher interest rate compared to bank fixed deposits (FDs). Additionally, PPF offers liquidity through loan facilities and partial withdrawals, while also providing flexibility in extending the tenure.

FAQs

What are the tax benefits of investing in a PPF account?

Contributions to a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act, and the interest earned and maturity proceeds are tax-free.

Why is a PPF account considered a safe investment option?

PPF accounts are fully backed by the government of India, providing guaranteed returns and financial security with minimum risk involved.

What is the flexibility offered by a PPF account in terms of contributions?

A PPF account allows contributions ranging from a minimum of Rs. 500 to a maximum of Rs. 1.5 lakh per financial year, which can be made in lump sums or installments as per the account holder’s financial capability.

What are the facilities available for loans and withdrawals with a PPF account?

PPF account holders can avail of loan facilities against their account balance starting from the 3rd financial year. From the 7th financial year onwards, partial withdrawals are also permitted, providing flexibility in case of financial emergencies or unexpected expenses.

What is the lock-in period for a PPF account?

The lock-in period for a PPF account is 15 years, encouraging long-term investment and allowing the power of compounding to grow the investment over time.

Is premature closure of a PPF account possible?

Premature closure of a PPF account is allowed under certain circumstances, such as life-threatening diseases, critical illnesses, higher education funding, or a change in residential status, subject to meeting specific eligibility criteria and providing relevant supporting documents.