Every year, billions of Indians pay millions of rupees in
taxes. Anyone who earns an annual income exceeding ₹250,000 is required to pay
taxes by law. While paying taxes is mandatory, the Government of India also
offers various schemes through which taxpayers can create huge saving and also
get some respite in the form of tax deductions and exemptions. One such scheme
that enables all Indian citizens to invest and avail tax exemptions is the
Public Provident Fund or PPF scheme.
Here are four crucial facts you need to know if you wish to invest in this
scheme.
Eligibility – inclusions and exclusions
To be eligible for PPF, you need to be a resident Indian
citizen. You can be a self-employed individual or a salaried professional to
open your account. While any individual can open this account, members of Hindu
Undivided Families (HUFs) and Non-Resident Indians (NRIs) are not permitted to
open a PPF account. That said, if you open the account and assume NRI status
later in life, you may continue parking your funds in this savings scheme.
Scheme duration and annual investments permitted
The scheme comes with a 15 year lock-in period. However, you
can extend the scheme is indefinite slots of 5 years after completing the
initial lock-in period. You may invest a maximum of ₹150,000 per annum in the
scheme, irrespective of whether you choose to invest the sum as a lump sum or
in investments. However, you cannot exceed 12 installments in a year. Also, to
keep the account active, you are required to invest at least ₹500, once a year.
If you are an NRI PPF account holder, you can invest a maximum of ₹70,000 per
annum.
PPF account opening details
Opening your account under the Public Provident Fund scheme
is rather easy. You can do it offline, through your preferred bank. A bank
representative can assist you with the account opening process. If you are
comfortable with using internet banking, you can also open PPF account online
through your bank’s net banking portal. You need to fill the account opening
form, link your PAN and Aadhaar details and submit it on the link specified in
the account opening form. Note that you can only one account under this scheme.
Tax implications
The PPF scheme offers some of the best tax benefits when
compared to any long-term savings scheme in India. You can avail tax deductions
of ₹150,000 (i.e. the maximum tax-free amount permitted) per annum.
Furthermore, the entire investment is categorized as an EEE investment, which
means you are not required to pay any taxes on the sums deposited, the interest
earned on deposits and the final amount at maturity.
