PPF – Save Taxes and Secure Future
Public Provident Fund(PPF) is a long term saving plan which provides financial security as well as tax benefits. It is one of the most secured long term investments. PPF account is opened for an initial period of 15 years with a minimum deposit of500 in a financial year and you can invest upto70,000. The deposit in the account earns interest @ 8% compounded annually. The account will continue earning interest even after maturity period without making any further deposits.
In the present tax scenario, as per the Income Tax Act, 1961, if you make investment in PPF, you can claim deduction u/s 80C equivalent to the amount deposited in the PPF upto the limit of70,000 and the interest on such deposits is also exempt from tax u/s 10(11). Moreover, the amount received at the time of maturity is also tax free making the investment fully tax free i.e. currently it comes under the EEE (exempt, exempt and exempt) regime. (i) Exemption on investment made, (ii) Exemption of interest income, and (iii) Exemption at the time of withdrawal.
PPF deposits are exempt from wealth tax as well. Clubbing provision is also not attracted in case where investment is made in the name of minor child but Joint account is not permissible.
The Direct Tax Code (DTC), replacing the Income Tax Act, 1961, had initially proposed to tax PPF under EET (exempt, exempt, tax) regime. This proposal caused wide spread furor from various sections of the society, and which forced the government to again shift PPF to EEE regime.
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