Public Provident Fund: Things you Should Know

Public Provident Fund or PPF is a good long-term investment for any individual. However, many people don’t feel comfortable with its maturity duration, which is 15 years.

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The government has recently altered the PPF scheme and brought several changes that will bring relief to many people. One of these changes is the option ffor premature closing of PPF accounts, although this can be availed only under certain circumstances. But first things first:

What Exactly is PPF?

Public Provident Fund is a long-term savings scheme which was created by the government especially for the unorganized sector and the self-employed in India. It allows the investor to earn a large lump-sum after a period of 15 years (generally around their retirement).

What’s the Interest Rate, and Duration?

At present, the interest (which is compound interest) offered with PPF scheme is about 8.1%. It is credited to the account holder on March 31 every year.

The term duration of PPF accounts is 15 years, although the effective duration is 16 years because the year the account is opened also has to be added to the duration.

The government has now given the provision of closing a PPF account before maturity. However, there are certain conditions. For starters, the minimum lock-in period is 5 years. The account can also be close under specific circumstances, such as medical treatment or higher education, etc.

A few things to know about PPF:

• The minimum and maximum deposit amount for a PPF account per year are 500 and Rs. 1,50,000 respectively.
• A PPF account can be opened at most nationalized banks.
• PPF also offers tax benefits as per Section 80C of the Income Tax Act.

The PPF scheme is one of the best options to go for if you seek a reliable long-term investment. It’s also a good idea to start early if you plan to invest.