Are you making the most of PPF?

In the financial year 2014-15, the maximum amount that can be invested in PPF has been increased to Rs 1,50,000 from Rs 1,00,000. The maximum amount that can be claimed under section 80C is also increased to Rs 1,50,000.

PPF is a very popular investment under Section 80C of the Income Tax Act – with twin benefits of tax saving along with long term secure investment.

How to open a PPF account? You will need to find out which of your bank’s branch allows PPF accounts. Some of the banks allow you to access your PPF account details online and you can easily transfer money from your savings account to your PPF account. In case you have your PPF account with one of the old nationalized banks, you may be required to maintain a physical pass book, and get it updated by visiting your bank, whenever you make a deposit or 2-3 times in a year.

How much to Invest? The minimum investment required is Rs 500 every year to keep the PPF account active. You can make this deposit at any time during the year. However to maximize your returns invest Rs 1,50,000 at the start of the financial year. Amounts deposited in April will earn interest for the whole year. Or else you can make deposits from 1st to 5th of a month, since interest is calculated on lowest balance in the account from 5th to and last date of the month. You will not earn any interest for a month if you deposit after 5th of that month. Let that amount sit in your savings account and earn some interest.

Tax on Interest Income – Interest is earned @ roughly 8.7% on your PPF account. It is entirely tax free and is better than what most FDs earn these days.

Tax on Maturity or Withdrawals – The PPF account matures after 15 years. Receipts on Maturity or withdrawals are tax free. Money is allowed to be withdrawn after 5 years.

Make the most of PPF and the deduction under section 80C, write to us if you have any questions.


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4 Responses to Are you making the most of PPF?

  1. BARIN January 2, 2015 at 11:07 am #

    Is the upper age limit restricted for opening PPF account in State Bank of India?

    • cleartax-team January 2, 2015 at 1:24 pm #

      Usually there is no upper age limit for opening a PPF account.

  2. Sagar Mahajan January 7, 2015 at 7:43 pm #

    I had made a PPF account in SBI Bank on 05-04-2014 with initial deposit of 10400/- and planning to deposit as much as possible before April. So what would be the interest gained till now and when will be the maturity date? Help me as i am new to PPF. Also can we transfer the amount through neft to a PPF account?

    • cleartax-team January 8, 2015 at 7:25 pm #

      You can deposit a maximum of Rs 1,50,000 in a year, so you can deposit Rs 1,39,600 before 31st March 2015. The PPF account earns an interest of 8.7%. Therefore uptil 31st Jan you would have earned an interest of roughly Rs 800 for 10 months. You may have received a PPF passbook from your bank, you can take it to your branch and ask for updation – that shall provide you accurate details of interest that has been credited to your PPF account. From what we know, SBI does not yet accept online transfers to PPF accounts.
      The maturity date would be 31st March 2030 for your PPF account.