Are retirement savings happening right now in your life? As you take a walk in your 20s and 30s – or even more at times, we start saving up for retirement, don’t we? Fear starts steering about when we think of a time that we would not be working or earning – but still, need money to live. We look for different pathways while we look for the best options to start investing for retirement.
Do you know one of the best ones? It is definitely a public provident fund. If you are a working person, you have definitely heard of it – but here, we will talk about it in a little more in-depth.
What is a Public Provident Fund?
The Public Provident Fund (PPF) was established in India in 1968 with the goal of mobilizing small resources in the form of investment and providing a return on them. It is also known as a savings-cumulative-tax savings investment vehicle since it allows one to create a retirement corpus while saving on annual taxes.
Anyone looking for a secure investment solution that allows them to save taxes while earning assured profits should create a PPF account.
The Public Provident Fund (PPF) program is one of the long-term investment options that provide an attractive rate of return on investment. The interest and refunds are not taxable under the Income Tax Act. Under this system, one must open a PPF account, and the amount deposited during the year is deductible under section 80C.
What is the Role of a PPF Account?
Most importantly, this is an investment you would not have to fear because the returns are always guaranteed. With this account – you can invest online, follow the PF withdrawal online process, and much more.
It is also, if you should know – one of the best investments for an individual who is looking for a low-risk. It is government-backed and market-linked. As the returns are always fixed – they can be utilized as a diversification tool for the investor’s portfolio.
You know what the added perk is – it has the tax-saving benefit.
But, how can you get started with a PPF account? Don’t worry – it’s explained right here.
How to Invest in PPF?
A PPF account is one that can be opened at any Post Office or even with any nationalized bank. These days, even private banks are authorized to provide this service.
While you are going to invest in a PPF, make sure you have the following in your hand.
– An PPF application form (in needs to be filled in completely)
– KYC documents (It needs to be Aadhaar, Voter ID, License, and more government authorized documents)
– Address proof (It can be an electric bill, a house agreement, Aadhaar and more)
– Nominee Form
– Passport photograph of yourself
– The money you want to deposit to start off (you don’t want to forget this)
How much returns will you get?
As of now – which is 2022 quarter 1 – the interest rate is 7.1%(You have to know this can change).
The annual interest you earn over a year is 7.1%.
There are certain terms and conditions to this scheme too, as there are for many other schemes – let’s get to know them, shall we?
The Pros of a Scheme
- You need to be invested for a minimum of 15 years. If you are in it for the short term – you know that your money is safe and locked in.
- The minimum limit of investment for the scheme is Rs.500 and a maximum of 1.5 lakhs for a year. Also, you can either make a lump investment or choose one in the monthly form.
- You need an opening balance while opening the account, and that is why it was mentioned earlier don’t forget that money. You need to start with Rs.100 and not over a lakh and a half.
- You can deposit it into the PPF account through cash, cheque, DD, or a bank transfer.
- You can nominate someone while you open your account.
- You can also choose to open a joint account – but for minors.
- Since it is a scheme that is backed by the government – it is risk-free.
Also – one of the most critical things you need to know is whether you can invest in the scheme or not. Let’s find out the eligibility criteria.
Who Could Possibly Invest in a PPF Scheme?
- The PPF scheme can be invested in by any Indian citizen, so – if you are one – you are all set to start off.
- Unless the second account is in the name of a minor, each citizen can only have one PPF account.
- PPF accounts cannot be opened by NRIs or HUFs. However, if they already have a PPF account in their name, it will stay active until its completion date. However, unlike in the case of Indian citizens, these accounts cannot be extended for a period of five years.
Cons of a PPF Scheme
- The lock-in period is lengthy, lasting 15 years.
- Joint accounts are not permitted, which means that one person can only handle one account unless it is for a youngster.
- NRIs and HUFs are not permitted to open an account.
- There is a maximum deposit limit, you know that – it is of Rs.1.5 lakhs in a PPF account.
- There is no available liquidity.
You know everything about the PPF scheme now – which means it is time for you to figure out whether you can invest in it or if it suits your financial goals.