The Public Provident Fund is a savings-cum-tax-saving instrument in India introduced by the National Savings Intitute of the Ministry of Finance in 1968.The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits.The Government on 12-12-19 introduced new PPF scheme.
PPF is a 15-year scheme and can be extended by 5 years at a time.
The minimum yearly depositor Rs. 500/ Is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of Rs. 1.5 lacs per financial year.
In the PPF scheme , not only is the principle non-taxable, the interest accrued to the saver is also completely tax free. Moreover, even premature withdrawals are non-taxable
The account can be opened at specified nationalised banks or post offices. All salaried and non-salaried individuals , Hindu Undivided Family. And NRIs can invest in PPF. Contributions in the names of spouse and children qualify for the rebate , but the investment will be deemed a gift.
If you are desperately in need of funds ,you can opt either for a partial withdrawal or take a loan on your PPF account.
Further, the withdrawn amount does not have to repaid. Nor any interest payable on it.
Do not worry if in a particular year, you do not have enough money to deposit in PPF account.There is where PPF comes into its own. If such a situation arises after the initial seven years, you will have access to a part of your PPF , so even if you are short of funds , you can use your existing money to pay for your PPF investment . In other words , if all you are looking at PPF simply as as a means to save on taxes, you do not need to put aside additional funds. You can withdraw from your PPF and deposit the same money right back.
It is difficult to find any other fixed income instruments , at the same low risk level, that can yield you comparable returns. Moreover, an investment in the PPF is equilateral to the risk of lending to the Government, and hence has the lowest level of default risk.