Investing wisely for the future is essential, and a Public Provident Fund (PPF) account is one of the best ways to do this. Understanding "What is a Public Provident Fund account?" will help you appreciate its benefits.
Understanding Public Provident Fund
The Public Provident Fund (PPF) is a popular long-term investment scheme in India, introduced by the National Savings Institute under the Ministry of Finance in 1968. The PPF stands for Public Provident Fund and is designed to encourage small savings by offering attractive interest rates and tax benefits.
Key features of a PPF Account
- Tenure: The PPF Account has a lock-in period of 15 years, making it a long-term investment. However, it can be extended in blocks of 5 years as per your financial goals.
- Interest rate: The interest rate on PPF is determined by the government every quarter. Currently, it offers competitive rates that are often higher than many Fixed Deposits.
- Tax benefits: Contributions to the PPF Account are eligible for tax deductions under Section 80C of the Income Tax Act. The interest earned and the maturity amount are also tax-free.
- Deposit limits: You can start a PPF Account with a minimum deposit of ₹500 and a maximum of ₹1.5 lakh in a financial year. Deposits can be made in a lump sum or installments.
- Risk-free returns: Given its government backing, the PPF Account is considered one of the safest investment options. The interest rate, while subject to periodic revision, has historically been attractive.
- Loan and withdrawal facility: PPF Accounts allow partial withdrawals from the seventh year onwards. Additionally, you can avail loans against your PPF balance from the third to the sixth year.
Opening a PPF Account
1. Eligibility: Any resident Indian individual can open a PPF Account. A single person can hold only one PPF Account, except for a minor.
2. Documentation: Basic KYC documents such as an Aadhaar card, PAN card, and address proof are required.
3. Application form: Fill out the PPF Account opening form available at Axis Bank or the post office.
4. Initial deposit: Make the initial deposit (minimum ₹500) to activate the account.
Maximising your savings with a PPF Calculator
Use a PPF Calculator to plan your contributions effectively and make the most of this government-backed savings scheme.
To use the PPF Calculator effectively, enter the annual investment amount, the current interest rate, and the investment duration (15 years as default). The calculator will compute the total corpus, including the interest earned, based on the compounding effect of the annual contributions. Most calculators provide a year-wise breakup of the contributions, interest earned, and the total balance.
Also Read: Top 9 differences between Fixed Deposit (FD) vs Public Provident Fund (PPF)
Wrapping up
A PPF Account is a prudent choice for those looking to invest in a safe, long-term savings scheme with tax benefits. Whether you're planning for retirement, a child's education, or simply building a robust financial corpus, understanding PPF's meaning and leveraging its features can be highly advantageous.
To start your journey towards secure savings, consider opening a PPF Account with Axis Bank today. Use a PPF Calculator to plan your contributions effectively and make the most of this government-backed savings scheme.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
