Public Provident Fund (PPF), a retirement planning-focused instrument, was introduced by the National Savings Organization in 1968. PPF has a lock-in period of 15 years and comes with an EEE (Exempt-Exempt-Exempt) tax status. The maturity amount and the overall interest earned during the period of investment are tax-free.
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What experts say
According to experts, periodic investment in PPF for a long-term can do the trick with the power of compounding. The longer the money stays invested, the quicker it grows, they say.
"One can only invest Rs 1.5 lakh in PPF in a year. However, it gives one of the highest returns among the safest fixed income products. On top of that, it offers the best tax saving options," said Suren Kochhar, senior president, head of sales & marketing, YES Asset Management (India)
Interest rate
The interest rate on PPF is reviewed every quarter and may change depending on the government announcements. At present, it offers a tax-free return of 7.9 percent annually.
According to Arpit Jain, vice president, Arihant Capital, the fixed rate of return brings in an element of predictability in the gains that one can expect when saving money in PPF.
What happens after account matures
The maturity period of PPF account is 15 years. However, the same can be extended within one year of maturity for a further five years and so on.
Also, the PPF account can remain active even after maturity, without making any fresh contributions. It continues earning tax-free interest after maturity, according to experts.
New PPF rules
Recently, the government introduced new PPF rules, replacing all the previous rules. As per the notification, the amount in the PPF account will not be liable to attachment under any order or decree of any court in respect of any debt or liability incurred by the account holder.
First Published: Jan 21, 2020 4:17 PM IST
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