Saving for 80C ? make every Paisa count... Invest in PPF

Make Wise Decisions.. Start Saving in Public Provident Fund (PPF) today

PPF is suitable and recommended for all age group as it induces voluntary savings in individuals. It helps create “MAGIC” with simple and disciplined steps. 

1) Say you wish to create a corpus for your child, say from his current age of 5 years till he/she turns 21 years. 

What you need to do?

•   Simply make an investment in PPF of Rs.1,00,000/- every year ( or Rs 8,000/- pm) for the next 15 years.

•     Importantly between 1^st and 5^th of any month for every financial year for the duration.

Result: You would give your child a tax free corpus of Rs. 29,32,428/- when he turns 21.

2) Or you wish to create a healthy retirement corpus through PPF

What you need to do?

• If you are presently 40 years old and can set aside Rs. 2,00,000/- per year to be invested in your and your wife’s PPF account respectively .

•  Follow the same method as stated in case 1 of investing between 1^st and 5^th April of every financial year for the next 20 years till you retire when you turn 60 ( i.e. tenure of 15 years + 1 block extension of 5 years )

Result: By the time you are about to step into your sunset years, the retirement corpus you would be getting is Rs.98,84,584/-.( i.e. almost Rs.1 crore)

LETS LOOK At PPF in detail....

What are the features of PPF?

•  It is a long term tax saving investment option and gives tax free corpus on completion of its 15 years of tenure.
•  The annual rate of return is at 8.7% for the current financial year. The returns are reset every fiscal year and are bench marked against the 10-year government bond yield. The rate of interest is compounded annually
• Only Indian citizens can open a PPF account. NRIs and foreign nationals are not permitted to do so. 
• PPF account can be opened in any nationalised bank or post office.
• The minimum investment under PPF is Rs 500 p.a and can go up to a maximum of Rs 1 lakh p.a. This can be made as lump sum or in installments, up to a maximum of 12 in a year.
• A PPF account can hold only one PPF account in an individual’s name and cannot be a joint account.

Benefits of Investing in PPF

•  Being a sovereign backed instrument, PPF offers the highest level of safety with assured returns.
• PPF account cannot be attached under any court order with respect to any debt or liability of the account holder.
•  Once the 15-year tenure has been completed, the account holder can extend it by 5-year blocks as long as he/she desires. 
•   Though the lock-in period is 15 years, investors are permitted premature withdrawals after a certain period. A Loan facility is also available.
•  Investments in PPF offer a deduction under Section 80C of the Income Tax Act up to a maximum of Rs.1,00.000/- to an individual.
•  The principal amount invested gets a tax deduction. The interest earned is also tax free. On withdrawal, the principal and interest accumulated are exempt from tax. Thus, it comes under the EEE category (i.e. Exempt-Exempt-Exempt from tax at all stages).

Thanks and Regards

Team

Saarthi Financial Planner

Email: saarthifp@gmail.com

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