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
