Sunday, September 25, 2011

Public Provided Fund (PPF) : One of the Best

It all started when I was just watching a stupid program on my stupid box and playing with my 9 months old son. Mean while my Dad's phone rang and he attended it and had a quiet lengthy conversation. The person(in his 70's) speaking on the other end was inquiring about my son and about the investments we have made for him. During the call my Dad was told to open an PPF-Public Provided Fund Account as soon as possible.

Me and my Dad were wondering on what kind of Account it is, personally I have heard of Savings a/c all the time, then Current a/c occasionally, then about Recurring Deposit a/c only when a message popped up in my banks website, then about Provident Fund a/c which I got to know only when I joined into my first company. But never I had heard about this PPF Account, and neither my dad in fact. My Dad was telling me that the old guy to whom he had spoken just a while back in fact had an PPF a/c opened by their parents. And they had been opening this account since almost 3 generation in their family. We wondered and I tried to gather information on this kind of account. Then I was amazed to see that it was in existence and considered to be one of the best account in India, sponsored by it's Government. 

Here in this blog I would be helping the blogs visitors to understand the advantages of PPF Account completely. The PPF a/c could be opened in most of the Nationalized Banks or through Post Offices, But I personally suggest you to go for SBI as it even provides the facility of Online Transfer(most of you like this option...  isn't it..??). 

1. What is PPF account?
A: PPF stand for "Public Provident Fund", it's one of the best investment account offered by government of India through Nationalized Bank and Post Offices which I believe everyone should have it.

2. What are it's Uses?
A: It's uses are several, you yourself would know by the end of this article.

3. Who, How and where can you open the account?
A: Any one can open the account from anywhere and Anyone can open the account on behalf of minors to whom he is either Parent or Guardian. Anyone can open this account in most of the Nationalized Banks and Post Offices by submitting PPF account form along with 3 photos and an address proof and PAN card.
Suggestion: SBI is the best with online transfer facility.

4. What is the investment limit?
A: You can start investing from as low as 500 RS /year to a maximum of 70,000 RS /year. There is not restriction that you have to stick to an amount throughout the term. You can invest any amount between the above mentioned yearly.

5. Term of the account?
A: 15 years, does it look too long term? I bet you would be double happy by the end of that term. However you can extend the account for 5 years and make fresh Investments.

6. What is the Interest rates?
A: The interest is currently 8%, but it is subject to change as per the Government of India guidelines.

7. What about Withdrawals from the account in between?
A: There is lock in period of first 6 years, during which you can't withdraw any amount. From 7th year onward you can withdraw once a year, up-to 50% of the balance amount.

8. Can you get any loan from this account?
A: Yes, surely you can from the 3rd year. But, maximum loan amount would be maximum of 25% of the balance amount.

9. Can an NRI open PPF account?
A: Answer is sadly NO, this account is available to the residents of India.

10. What if PPF account holder becomes an NRI?
A: They can operate their PPF account through NRE(Non-Resident External) and NRO(Non-Resident Ordinary) accounts.

11. What about the Tax Benefit?
A: Yes, it's Yummy Yummy. You are entitled to full tax benefit as it's covered under 80C. Suppose you invest 70,000 RS /year and your income is 10,00,000 RS /year then you taxable amount would be 9,30,000 RS for that year.

12. Can you stop making any investment in between the term?
A: Yes, you can always do that. But, I don't suggest unless your are unable to pay the minimum amount of 500 RS /year. The balance amount would be payed with interest only after 15 years.

13. What if in case of death?
A: I wish you all readers have much longer life than me. Yet, I have to give details. You have to nominate at-least one person as nominee while opening the account. The nominee cannot continue the account after death.

Hope I have given sufficient information on PPF Account, now it's your turn to decide on whether you would like to open one or not. But, I strongly recommend to open one. Especially if you have a new born baby and want to invest money for his/her future, this would be an ideal/safe/guaranteed investment. If your kid is getting money from relatives and other(where in India it's a quiet common practice that elders give money to kids when they either visit out place or we visit their place), you can surely deposit this money into the kid's PPF account you opened. Else which would have been spent for other reasons or rather our wishes.
It's also doesn't have any constraint on the account holders that he should pay every yearly without fail or huge minimum amount, except that he had to pay a minimum amount of 500 RS and up-to a maximum of 70,000 RS.

If you still have any doubt's on this topic of discussion you can surely drop comments on this blog using a link available at the blog end. I would greatly appreciate if you comment your suggestion to improve this blog or any financial subject you want us to answer.

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