MONEY: If you run a business, or are self-employed and don’t save anywhere, PPF may be a good option for you. PPF account (PPF ACCOUNT) Where to open and how to get interest in it Tax (TAX)Let us take an example to remove the confusion of what is math etc.
Nirav Shah works in web and app development. Nirav earns as much as his working friends, but the regret of not investing like him in a provident fund like PF, haunts Nirav. But Nirvana doesn’t have to worry, because it has a choice. Self-employed people like him can invest in PPF i.e. Public Provident Fund. PPF works just like EPF for the working class. The only difference is that in EPF money is deposited from salary every month while in PPF you have to do this work yourself.
You have to invest in PPF for 15 years. The government regularly pays interest on it. Anyone can open a PPF account at a bank or post office. The attractiveness of this scheme has increased as PPF is getting tax benefits.
How useful this scheme is can be gauged from the tremendous investment made in PPF during the Corona epidemic. According to RBI data, a total of Rs 1,09,961 crore was invested in PPFs and pension funds in the September quarter of FY 2019-20 and increased to Rs 1,21,831 crore in the September quarter of the current financial year.
How to avoid tax from PPF?
PPF is a useful scheme for tax evasion. Investments in this category fall into the Triple E (EEE) category, i.e., investments made in them are tax-free on three levels.
The money you withhold is tax deductible up to Rs 1.5 lakh under section 80C of the Income Tax Act. The entire amount received at the end of the term is also tax-free. Thus, if you are a businessman or a businessman, this is a good option to get 80C tax-benefit and tax-free maturity.
How much money can be deposited in PPF
In this scheme you can deposit a minimum of Rs.500 and a maximum of Rs.1.5 lakhs in a financial year. Apart from yourself, you can also open a PPF account for your spouse or minor child. You can deposit Rs 1.5 lakh per year in each account, but you will get tax benefit only on Rs 1.5 lakh.
How is interest calculated in PPF?
The government calculates interest in PPF on a quarterly basis. Its interest rate has been stable at 7.10% since April 2020. Bank FD interest rates have declined during this period, but PPF interest rates have remained above 7 per cent.
The bank has got higher returns in PPF as compared to FDs. The interest you get in PPF is compounded. Suppose, if the opening balance of your account is Rs. 10,000, you will get interest of Rs. Thus, the total amount will be Rs. 10,710. When the interest is calculated in the following year, it will be calculated on this amount. Thus, as you increase the investment, the interest will also increase. This amount will be credited to your account at the end of the financial year.
Even small savings can save you a lot of money.
If Nirav keeps depositing Rs. 1 lakh every year in PPF for 15 years, he will get an investment of Rs. 15 lakhs in 15 years. Thus, he will get Rs 27,12,139 at maturity and this whole amount will be considered tax-free.
For whom is PPF useful?
It is necessary to invest in PPF for 15 years. However, you can withdraw a partial amount in case of contingency. Financial experts certainly consider the scheme a safe investment, but are not satisfied with the interest earned on it compared to inflation, as there is a fear of lower interest rates. If you can’t afford it, invest in PPF. If you can invest up to 15 years, then you should invest in this because PPF has a lock-in period of 15 years. So often when money is needed, money cannot be withdrawn from it.
Money Nine’s advice
- If you want to raise funds for retirement, PPF is a good option.
- It offers good interest rates compared to bank FDs.
- If you intend to save for retirement, you will get an attractive return on your investment and the risk will be less.
- Investors need to have all kinds of investments in their portfolio.
- If you do not have any long-term investment assets in your portfolio, you can include PPF in it.