Public Provident Fund : A summarized view

Public provident fund (PPF) is one of the best tax saving investment option under section 80C in the point of view safety. However, it does not guarantee to build a great wealth but it offer a great sense of safety with capital appreciation. Many of investors often confused between EPF(Employee Provident Fund) and PPF. Today, we will understand about PPF investment. The main feature of PPF as given below:

• ·         Only Indian citizen can open PPF account. No NRI and foreigners are allowed to open this account. If anyone get NRI status after opening the PPF account then he/she can be continue with it. 

• ·         It can be opened in the name of single name. Joint names are not allowed. Parent can open this account in the name of minor but the total tax exempt limit would be Rs 1 lakh only including parent’s investment.
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•  ·         The minimum amount needed Rs 500 every year to maintain it. The investor can deposit maximum 12 times in a financial year.

• ·         The return is flexible but sure and it decided by RBI every year. For 2013-14 the rate of return is 8.7% per annum. It is the safest investment backed by government of India. It cannot be attached under any court order for debt recovery.

• ·         You get tax benefit under section 80C on invested amount subject to upper limit Rs 1 lakh. The return is also tax free.
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• ·         It has 15 year lock-in period. After completion of 15 year one can extend it by 5 year block period. It allowed partial withdrawal facility after completion of 5 year after opening the account. The loan facility is also available in PPF.

• ·         The PPF account can be opened in post office, SBI branches. Now some private banks like ICICI bank are also offering such services. If you move your residence from one place to another, in that case you can easily shift it to nearest bank or post office.
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It is great tool to accumulate wealth in long term with higher degree of safety. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

www.artofinvest.com

www.arvindtrivedicfp.blogspot.in

Public Provident Fund : The best Tax Saving option in debt category

PPF: The Best option in Debt segment

First of all, Happy Makar Sankrant to all of my readers. As you know tax planning season already begun and the investor are busy to find the best tax saving instrument. When we talk about investment, it can be divided in two broad category: 1. Equity segment 2. Debt segment. Both categories have their own different characteristics. PPF (Public Provident Fund) is the best option available in the debt segment. Here we are going to discuss in details about this category:

Public Provident Fund (PPF) :

All Indian residents are eligible for PPF scheme. NRI are not eligible for this scheme. It can be opened with the name of minor by the legal guardian. However, each person allowed have only one PPF account. If person become NRI after opening the PPF, in that case subscription would be continue till maturity.

A minimum yearly deposit of Rs 500 needed to open and maintain the account. You cannot deposit more than 12 times in a financial year but you can invest more than 1 times in a particular month. If you deposit before 5th of any month then only you will get the interest for that month. The maximum limit of deposit is Rs 1 lakh in a particular financial year. Online NEFT transfer facility is also available in these days in many banks.

The govt of India decide every year the return rate of the PPF. The rate of interest for current FY year 2013-14 is 8.7%. The minimum tenure of the PPF investment is 15 years. You can extend it in 5 years with or without contribution after 15 year. You can also withdraw up to 60% amount at the time of completion of 15 years.

Loan and withdrawal facility are also available in PPF account also. The rate of interest charged on loan 2% more than the prevailing on interest rate on PPF after 1st December, 2011.  If you have taken loan before 1st Dec 2011 then you have to pay interest on loan only 1% more than prevailing PPF rate. Pre mature withdrawal allowed from the end of the sixth financial year from when the PPF commenced. The maximum amount can be withdraw is equal to 50% of the amount in the account at the end of the 4th year preceding the year in which the amount is withdrawal or the end of the preceding year whichever is lower.

If PPF account holder does not deposit Rs 500 during entire financial year, the PPF account would be deactivated. To activate the account you have to pay Rs 50 penalty and minimum Rs 500 for each inactive year. Nominee facility is also available and you can appoint more than 1 nominee and can allocate the particular percentage to each nominee.

Annual contribution qualify for tax exemption under section 80C with maximum limit of Rs 1 Lakh including all instruments available under this section. The interest earned on contribution and withdrawal are also exempt from tax. It is the safest option for conservative investors who do not want take risk. For your information we are providing the interest rate offer by the PPF over the time:

• 01/04/1986  to 14/01/2000    :   12%
• 15/01/2000  to  28/02/2001   :   11%
• 01/03/2001  to  28/02/2002   :   10.5 % 
• 01/03/2002  to  28/02/2003   :   9% 
• 01/03/2003  to  30/11/2011   :   8%
• 01/12/2011  to  31/03/2012   :   8.6%
• 01/04/2012  to  31/03/2013   :   8.8%
• 01/04/2013  to   onwards        :   8.7%

Once again my best wish to all of you for good financial health and physical health on the eve of Makar Sankranti. For more detail and any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Schemes offered by Post Office

Post Office Schemes

The telegram has ended recently and the use of postal stamp has got reduced in recent time in our country. The use of Indian post has got reduced in urban area. Now, the people prefer courier to deliver documents. The increasing use of email, scan documents are also reason behind the shrinking use of Indian Post. However, it is still significant in rural India and may play important role in future due ot its wide network.

The Indian Post has also applied for banking license recently. It has strong and wide bandwidth across the whole India to serve the people banking service with 1.55 lakh branches. Its saving schemes are still popular among all type of investors. Today, we will discuss about all the schemes available in post office. The following schemes available with post office:

·         Saving Account

·         Recurring Deposit

·         Time Deposit

·         Monthly Income Scheme

·         Public Provident Fund (PPF)

·         Senior Citizen’s Saving Scheme

·         National Saving Certificates (NSC)

·         Other Financial Services

(A) Saving Account: It can be open with minimum balance amount of Rs 50 without cheque facility. If you avail cheque facility then you have to maintain Rs 500 minimum balance. You will get 4% interest on the balance amount in your account.

(B)  Recurring Deposit: It offers 8.3% interest rate with tenure 5 year. The tenure may be extended up to 5 year as per investor willingness at the time of maturity. The interest credit on the 15 days balance. For this deposit you need not open saving account with post office.

(C) Time Deposit: It is eligible for section 80(c) benefit. You can choose deposit term between 1 to 5 years and can foreclosure after one year. It offers interest rate between 8.2% to 8.4%. Minors above 10 year also operate this type of account.

(D)  Monthly Income Scheme: The minimum requirement for this scheme is Rs 1500 and maximum limit Rs 4.5 lakh. Its tenure is 5 year although foreclosure allowed with penalty. It offers 8.4% interest on your deposit and interest credited in your post office saving bank account.

(E) Public Provident Fund (PPF): It is eligible for section 80(C) tax benefit. Its maturity amount is also tax free. The minimum deposit required is Rs 500 and its maturity period is 15 year. Withdrawal allowed after 6 year with some term and condition. The term may be extended at the time of maturity for 5 year in a year. The interest rate for current year is 8.7% and it will decide by every year by government.

(F)  Senior’s Citizen’s Saving Scheme: The minimum age required to open this account is 60 year if opt VRS then it would be 55 year. It is eligible for Section 80(C) tax benefit. The maximum amount is allowed for deposit is 15 lakh per person in this scheme. Its tenure is 5 year. The interest rate offered in this scheme is 9.2% and quarterly credited in your account. Foreclosure is also allowed with penalty and it can be extended by 3 year at the time of maturity.

(G) National Saving Scheme (NSC): The minimum Rs 100 required for this investment. Its tenure is between 5 – 10 year. It is eligible for section 80(c) tax benefit and interest earned every year treated as reinvestment and eligible for section 80(C) also. The interest rate is offered in this scheme 8.5% to 8.8% depend on the maturity.

(H)  Other Financial Services: National Pension Scheme (NPS), money transfer, life insurance services is also offered by Indian post. Postal life insurance is only available for employee of central govt, state govt, public sector and semi govt organisations.

For more detail about any other query related investment, you can contact me through my email.

Warm regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Important points You should know about your PPF Account

PPF (Public Provident Fund) Account is very suitable option for those investors who want tax free return and safe investment option. Some points should be keep in mind when you open PPF account. Often a lot of queries come to me about PPF. So here I am sharing some points about PPF .

Opening a PPF Account :

Any Indian citizen can open PPF account except NRI. You can open PPF account in any nearest State Bank of India branch, or a branch of any of State Bank’s subsidiaries. You can also open an account in select nationalized banks, and the post office or selected ICICI Bank branches also. The required formalities are Fill  the form, attach a photograph, give your PAN Number. After opening PPF account you will also receive a pass book for recording all your PPF transactions.

At any point in your life, you are allowed to have only one PPF account in your name. You can also have an account in the name of a minor child of whom you are the parent / guardian. However that will be the child’s account, you will simply be the guardian. You can never have a joint account. If at any time it is seen that you have more than one account in your own name, the second account will be deactivated, and only your principal amount will be returned to you.

Loan Facility

You can avail a loan from your PPF fund in case of need. The first loan can be taken in the third year of opening the account. For example if the account is opened during the year 2009-10, the first loan can be taken during the year 2011-2012. The loan amount will be restricted to 25% of the balance including interest for the year 2009-08 in the account as on 31/3/2010. The loan must be repaid in a maximum of 36 EMIs. After settling first loan you can also avail second loan.

Withdrawal Facility

You can make one withdrawal per year starting from your seventh year. The first withdrawal can be done after the expiry of 5 full financial years from the end of the year in which your initial subscription was made. This means that from the day you open your account, you will need to complete 6 full financial years before you can make any withdrawal. Thereafter, you can make one withdrawal per year.

The amount of withdrawal will be limited to 50% of the balance at credit at the end of the fourth year immediately preceding the year in which the amount is to be withdrawn, or the balance at the end of the preceding year, whichever is lower. For example: if you opened your PPF account on April 1st, 2006, you can make your first withdrawal after April 1st 2012, and the amount of withdrawal will be limited to 50% of the balance as 31st March, 2008, or the balance on 31st March 2012, whichever is lower.

Options at the time of maturity

There are three options available at the time of after 15 year maturity period.
Either you can withdraw your maturity amount, or you can extend your account by a 5 year block, as many times as you want and make fresh contributions, or you can extend the account without making any further contributions, and continue to earn 8% interest on it every year. The maturity amount is exempt from tax.
.If you choose to extend your account and continue making fresh contributions, you can extend it for a block of 5 years at a time, as many times as you want, you can also make withdrawals from the account, up to 60% of the account balance that was there at the beginning of the extended period. Just remember, if you choose to extend your account, submit the necessary documentation for extension before one year passes from the maturity date.

If you choose to extend your account without making any fresh contributions, you can do so. In this case, any amount can be withdrawn without any restrictions, you can only withdraw once per year. The balance will continue to earn interest till it is withdrawn.

If you have any other query about PPF and investment related feel free to contact me.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com