The Public Provident Fund (PPF) is a popular government-backed savings scheme in India, offering tax-free returns and long-term financial security. While most investors know about the basic features, there are lesser-known facts that can help you maximize benefits and plan better.
1. Flexible Contributions Beyond the Minimum
While the minimum annual contribution is ₹500, many investors don’t realize that they can contribute up to ₹1.5 lakh per year, either in a lump sum or in multiple installments. Flexibility allows better cash flow management without missing out on interest accrual.
2. Partial Withdrawals Are Possible
PPF allows partial withdrawals after the 5th financial year from the end of the year in which the first deposit was made. This feature is often overlooked by casual investors, providing liquidity in emergencies.
3. Loans Against PPF Balance
Investors can take loans against their PPF balance from the 3rd to 6th financial year. The interest rate on PPF loans is lower than personal loans, making it a cost-effective borrowing option without breaking the investment.
4. Interest is Calculated Monthly, Not Annually
PPF interest is calculated on the lowest balance in the account between the 5th and last day of each month, not the total yearly contribution. Planning contributions before month-end can slightly increase the interest earned.
5. Extended Tenure With Compounding Benefits
PPF has a 15-year maturity, but investors can extend it in 5-year blocks indefinitely. This allows long-term wealth accumulation with compounded, tax-free returns, making it ideal for retirement planning.
Conclusion
PPF is more than a simple savings scheme. By understanding partial withdrawals, loan options, monthly interest calculation, and extension possibilities, investors can strategically use PPF to grow wealth, manage emergencies, and plan for the future.
FAQs
Q1: What is the minimum and maximum contribution for PPF?
A1: The minimum annual contribution is ₹500, and the maximum is ₹1.5 lakh per financial year. You can deposit in lump sum or multiple installments.
Q2: Can I withdraw money from my PPF account before maturity?
A2: Partial withdrawals are allowed from the 5th financial year onward, based on the lowest balance at the end of the month. Full withdrawal is possible at maturity or after account extension.
Q3: Can I take a loan against my PPF balance?
A3: Yes. Loans are available from the 3rd to 6th financial year, usually at lower interest rates than personal loans. The maximum loan amount is typically 25% of the PPF balance at the end of the 2nd preceding financial year.
Q4: How is interest calculated in PPF?
A4: Interest is calculated monthly on the lowest balance between the 5th and last day of the month, not on the total yearly contribution. Paying deposits before month-end maximizes interest.
Q5: Can the PPF tenure be extended beyond 15 years?
A5: Yes. PPF can be extended in 5-year blocks indefinitely. This allows investors to continue earning compounded, tax-free interest over the long term.
Q6: Are PPF returns taxable?
A6: No. Both principal and interest earned in PPF are completely tax-free under Section 80C, making it a highly efficient long-term savings instrument.
Published on : 28th September
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share