The Public Provident Fund is a long-term savings plan that allows you to have an income after retirement
05-Jan-2016 •Research Desk
The salaried have the Employee Provident Fund (EPF) as a mandatory deduction, which makes them invest for the long-term on an almost automatic basis. However, this is not an option for the self-employed and those who work in the unorganized sector. They have to take care of their savings for retirement by themselves. One way to do that is by opening a Public Provident Fund (PPF).
The PPF was started by the government to promote long-term savings to help people have a source of income after they retire. Here is why you should get started with a PPF account too:
Habit of systematic savings
PPF encourages systematic savings by seeking contributions on a year basis. It enables investors to have the dual benefit of investing regularly and earning by the power of compounding. You can withdraw the invested amount after the lock-in period, during which you earn guaranteed returns. The PPF's interest rate is modified on 1st April every year, aligned with G-sec rates of similar maturity.
Tax deduction and tax-free on maturity
Investments of up to ₹1 lakh made in the PPF are eligible for tax deductions under Section 80C. Upon maturity, the entire invested amount along with the interest earned is tax-free in the hands of the investor. A further benefit is that the deposit is also exempt from wealth tax.
Facility of premature withdrawals
The PPF comes with a lock-in of 15 years, but it offers premature liquidity in the form of loans and withdrawals. Though this facility is subject to conditions, it can prove beneficial for someone who needs the invested money urgently for a crisis.
No age limit and capital protection
There is no age limit to open a PPF account. Any Indian citizen can do so from any post office or most nationalised banks. Since the PPF is backed by the Government of India, it provides complete capital protection as well. The Public Provident Fund is a long-term savings plan that allows you to have an income after retirement