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What are the Tax benefit on PPF (Public Provident Fund) In 2020?

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What are the Tax benefit on PPF (Public Provident Fund) In 2020?
By: sarojni singh
February 26, 2020
All Articles by: sarojni singh       View Profile
  • Contents

In all tax saving schemes, the PPF is considered as the most important and safe fund.   This system is known as EEE, i.e. Exempt, exempt and exempt, which means you will receive a 80C deduction on your income if you invest in it. In addition, your interest with its maturity income is tax-free in the hand of the investor. This article covers other aspects of the PPF scheme.

Eligibility for Public Provident Fund Pension (PPF)

Individuals residing in India are entitled to open a Public Provident Fund deposit. A PPF account can be opened by the legal guardian in the name of a minor or an unsound adult. Nevertheless, only one account under his / her name is available for each user.

Non-resident Indians (NRIs) may not open a Public Provident Fund Scheme account. However, a citizen who becomes a NRI during the fifteen years of the Public Provident Fund scheme may still contribute to the Fund on a non-repatriation basis until its maturity.

Investment and Returns 

For the purposes of opening and retaining the PPF account, a minimum annual deposit of ₹ 500 must be made, and a cumulative deposit of ₹ 1,50,000/ may be made into the PPF account in a single financial year. Deposits may be available in one go or flexible installments (multiples of ₹ 50). The quantity and number of installments can vary according to your convenience. The PPF account's payment is made on the check clearance date, not on the day it is delivered.

PPF after the 15 year period

The PPF account has a 15-year term. The entire money will be recovered after 15 years from the financial year in which you opened the account. The excess must be reversed.  You must open a new account after the deal expires. The main limit is that you will not be allowed to withdraw it until the end of seven years and 50% of your deposits can be withdrawn, if needed.

How to prolong the PPF account beyond 15 years PPF scheme holders have an option to continue their accounts for a total of 5 years after the 15th anniversary with or without a additional subscription. The balance in the fund will continue to collect interest at the normal rate until the account is closed as eligible for the PPF account. In the case that the credit is transferred without payment, an balance of limitations can be deducted. Moreover, only one annual withdrawal is allowed.

Nomination in respect of Public Provident Fund (PPF)

Nominatation facility is open. To joint nominees, the percentage of benefits for each candidate may be determined.

Loans against Public Provident Fund (PPF)

Loans may be made available from the third financial year except the deposit year. These loans shall not exceed 25 percent of the amount that was credited to the account holder at the end of the 2nd year immediately before the year in which the loan is sought.

When a previous loan or risk is pending, a refresh loan is not permitted. Income will be charged at 1% if repayment is made within 36 months and after 36 months at 6% of outstanding loans. The refund can be made in lump sum or installments.

The public fund is set up by the central government. You may open an account freely with any nationalized bank or postal office. The account can be opened on behalf of persons including minors.

The minimum amount is ₹ 500, which can potentially be 7.9% annually, and is also tax free. On maturity, the whole balance can be withdrawn. Tax free of charge is the interest received. The maximum amount that can be deposited in an account each year is ₹ 1.50,000. The interest on the subscription to the PPF is exacerbated.   In addition, it has a low risk–the government risk is attached to it. PPF can be obtained at post offices and banks.

Withdrawals from PPF.

If, in a given financial year, the PPF holder does not deposit a minimum of ₹ 500, the account will be deemed discontinued and loans and withdrawals will also not be permitted. The interest will, however, continue to rise, payable at the end of the term. This account may be restored by paying the ₹ 50 fee for each year of default together with each year's arrears for subscription of ₹ 500.

PPF tax concessions

1. Benefit u/s 80C – The Investments made in PPF Account are eligible for deduction u/s 80C

2. Tax Free Interest – No Tax is payable on the Interest Earned on PPF Account.

Disadvantages of PPF

The issue with PPF is its liquidity deficit. The investment made in the first year can be excluded only in the seventh year. Investment loans are however eligible from the third financial year. When liquidity doesn't matter, you can spend as much as possible in this scheme before looking for other opportunities for fixed income.

The second problem is currency debasement and government inflation policy, as PPF, unlike physical assets, does not include an inflationary individual.

Interest rates over time

  • 01.04.1986 to 14.01.2000…………………………  12.0%
  • 15.01.2000 to 28.02.2001………………………..  11.0%
  • 01.03.2001 to 28.02.2002 ……………………….  9.5%
  • 01.03.2002 to 28.02.2003 ………………………..  9.0%
  • 01.03.2003 to 30.11.2011…………………………    8.0%
  • 01.12.2011 to 31.03.2012…………………………    8.6%
  • 01.04.2012 to 31.03.2013…………………………  8.8%
  • 01.04.2013 onward…………………………………  8.7%
  • 2014 – March 2016…………………………………..8.7%
  • April 2016 – June 2016…………………………….8.1%
  • July 2016 – September 2016……………………..8.1%
  • October 2016 – December 2016…………………8.0%
  • January 2017 – March 2017………………………8.0%
  • April 2017 – June 2017……………………………..7.9%
  • July 2017 – September 2017………………………7.8%
  • October 2017 – December 2017………………….7.8%
  • January 2018 – March 2018………………………7.6%
  • April 2018 – June 2018……………………………..7.6%
  • July 2018 – September 2018………………………7.6%
  • October-December, 2018………………………….8%
  • January –March, 2019……………………………8%
  • April –June, 2019………………………………..8%
  • July – September, 2019………………………7.9%

Thank You.

 

By: sarojni singh - February 26, 2020

 

 

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