Oct 21, 2010 12:03 PM
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(Updated Feb 22, 2011 03:03 PM)
PPF or Public Provident Fund is a popular option for investment. PPF stands out for it's unique features and benefits, making it one of the most suitable investment choices by the working class.
Some salient features of PPF
How to start off?
To start investing in PPF, you first need to open a PPF account. You can open a PPF account in any Post Office or a Bank. While almost all nationalised banks provide it's account holders the facility of opening a PPF account, private banks may or may not have this provision. In case of banks, if you open your PPF account in the same branch where you have a Savings Account, it will be convenient for both you and the bank.
How do I open the account?
Opening a PPF account is quite similar to opening a savings account in a bank or a Post Office. You just need to carry a Photo Identification proof, your passport size photograph and your Pan Card (if any). It will be desired to carry both the original and the copies of your identification proof with you. While you need to submit the copy to the bank or the PO official, they may want to verify it looking at the original.
Upon your request, you will receive a form, on which you need to fill your details and provide your signature. Once the formalities are completed, your PPF account will be created, and you will get a PPF Passbook, similar to your Savings Account Passbook. Please note that, you may not receive your PPF Account number in the first day itself. But be sure to ask for it the next day when you update your Passbook. Your account number will be unique and will be written/printed on your Passbook cover.
How do I invest in PPF?
Investing in PPF is as simple as depositing money in your Savings account. You can deposit by cheque or cash. You just need to contact the bank or Post Office official and inform that you intend to deposit money to your PPF account. You will be given a deposit slip by the official. You need to fill up the details of your deposit in this slip. Like your name, PPF account number, the branch name, the amount you want to deposit, the mode of payment (cheque/cash), and duly sign it. Once you submit, your deposits will be entered in the system and you will be given a stamped receipt of your deposit slip. You can update your PPF Passbook afterwards, and find it to be updated. This is extremely important to keep a track of your money, and to find out at a later date how much you have invested on a earlier date.
How much can I invest?
This is probably the most important question of all. You can deposit any amount between Rs. 500 to Rs. 70,000 in a financial year. You can deposit money to your account as many times as you want. However, Rs. 70, 000 is the upper limit. You can't go beyound that. Similarly, you need to deposit atleast Rs. 500 each year to your PPF account; failing which your investment won't hold good.
What is the duration of this investment?
The duration of PPF investment is 15 years. After the term of 15 years, your investment will mature. You can then withdraw the total amount from your PPF account and use it for your benefit.
Benefits of PPF
Investing in PPF is advantageous on many counts. First of all, it's completely safe. Being a nationalised investment in nature, you can be sure that your money is safely deposited in the bank or Post Office. However, the major benefits of PPF lies in the interest rates and its tax saving nature.
Let us have a look -
Interest Benefits
You will get a 8% interest on the amount you invest each year. Since, this is greater than the normal savings account investment rate, investing in PPF allows your money to grow faster!
Tax Benefits
The entire amount you deposit in a financial year, is liable to tax deductions under Section 80C. Now, isn't that great! Investment and tax savings clubbed together, PPF is the one to watch out for!
Why choose PPF?
PPF is a 100% safe investment. There is absolutely no chance for you to get cheated owing to its nationalised nature. There is no risk in this investment. Your capital money will remain intact, and at the same time, interests will add on to it. You have convenience of depositing money at your will, whenever you feel like, whatever you feel like. Unlike some other investment options, where you must deposit a fixed amount of money each year or each month; and within a particular cut-off date only, PPF is a much much more flexible option. A 15 year old term is exactly suited for the working class. If you start a PPF account at the beginning of your career, 15 years down the line you will get a huge return from it. You can again invest or save this money for a secure future. PPF can act as an add-on retirement benefit to some too. Tax deductions is another great benefit of this investment, bringing you a lot of relief in the months of financial year end.
What could have made PPF better?
Like you can deposit money, you cannot withdraw money at your will from your PPF account. One was able to use this benefit till last year. Not only you could withdraw money, you could also take a loan against your PPF account. But now, the Government has changed its regulations and introduced a lock-in period of five years. Now you cannot withdraw money from your PPF account before five years from opening the account. Had this regulation not been introduced, people would have got more flexibility.
Conclusion
All in all, in a nutshell PPF is a great mode of investment. It's a safe and secure way of making your money grow. For people who invest for tax benefits only, PPF acts as a pretty useful option. Try investing in PPF. I already have. :)
