PPF is a risk- and tax-free product and enjoys the exempt-exempt-exempt (EEE) tax status. This means the contribution, accumulation and withdrawal are all exempt from tax. You can invest a minimum of Rs.500 and a maximum Rs.1.5 lakh in one financial year and this entire Rs.1.5 lakh qualifies for Tax deduction under section 80C of the Income-tax Act, 1961. The initial tenure is 15 years, with the option to extend for five years at a time after completion of this period. The returns are pegged to the average government securities (G-secs) yield. Hence, every year the return on your investment may vary. For 2017 - 2018 financial year, it is offering 8.1% per annum.
Since PPF is a long-term instrument, the interest on your account has more time to compound. Also, you can avail a loan on your PPF between the third and the sixth financial years. When you take a loan, the amount is restricted to 25% of the balance in your PPF. You can avail the loan at 2% higher than the PPF interest rate. The loan has to be repaid in 36 months.
PPF has the ability to generate real return thanks to its tax-free status. So, when it comes to PPF you need to stick to your asset allocation and use it as a tool to maximise your long-term debt investment.
For further information contact SaveTaxGetRich on 94 8300 8300
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