PPF or Public Provident Fund is a long term savings instrument, which have less or rather no risk in it.The initial investment period for PPF is 15 years which can be extended in multiples of 5 years.PPF have an attachment with the number five. Investment can be done as multiples of  five only, with minimum of  INR500/- a year.The max amount of deposit a year is INR70,000.Which can be done in installments also but max number of such installments is 12 a year. PPF is an India Government scheme. Thus, it is among the safest instruments one can invest in India. Therefore the primary fear in an investment “the risk ” is null, so making it perfect way for a long term investment.PPF guarantees the safety of  your principal and the interest earned on it.

Features & Functionalities & Benefits

•  Multiple income tax benefits :- First the investment made in PPF is deductible from your income under Section 80C of the Income Tax Act. Which means the entire PPF investment is tax free. Secondly interest earned in a PPF acount is tax free, this means on maturity of the PPF account while you withdraw your money you neednot spend a coin as tax.
• Variable interest rates :- This points to the dynamicity of the fund. Every year govt. changes the interest rates, it doesn’t mean that the fund is unstable.Since a lot of people are using this the interest rates are quite stable. Lets say the current rate of interest is 8% and you are in the highest income tax range(30%), since PPF is interest free the investment you make will get you an amount equal to 11.4% of bank FD.
• Low minimum investment :- The low minimum investment ensures even people with low income can go for a PPF account.INR500/- is the minimum yearly investment in PPF and maximum is INR70,000/-.And as i have mentioned earlier it is not necessary to invest the money as lump sum.It can be done in small amounts.
• A person can have only one PPF account and it cannot be opened in joint names, but nomination facility is available.
• Withdrawal and Loan options of  PPF allows withdrawal of certain amount of money to take care of emergencies, but this can be done only after the 7th year of investment, that also only 50% of the three  preceding years balance.Thereafter one withdrawal every year is permitted. PPF provides loan facilities from third to sixth year.For which you need to give 2% more interest than what you are getting for your account and need to be repaid within 24 years.And the max loan amount is 25% of  balance amount at the second immediately preceding year.
• Pre-mature closure of a PPF Account is not permissible except in case of death. A Nominee of a PPF account holder on death of the account holder cannot continue the account, but account had to be closed.

Now where to open a PPF account??-A ppf account can be opened in any nationalised bank, or any head post offices.On opening you will be issued with a passbook, which records all transactions.Now a days PPF is a good investment tool for business men also, because a PPF cannot be attached on decree or order of court. That statement  itself  clears the cause of business people.

Related posts:

1. What,Why & When about Investment?
2. Awareness on “80 c” of Income Tax Act
3. ELSS-Equity Linked Savings Scheme
4. “Mutual Funds” Know How
5. Income Tax Revisions in Budget 2010