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Public Provident Fund Scheme is the most popular small savings scheme in India. It is framed and governed under Public Provident Fund Act (PPF), 1968. PPF is a government scheme where small amounts of funds can be a regular investment. The aim of PPF is to provide retirement security for self-employed and workers from the unorganized sectors who do not have an option to contribute in EPF- Employee’s Provident Fund. Hence PPF has a long lock-in period for investments. Following are the key highlights of PPF schemes:
- Indian Citizen who is a Resident Indian can open PPF account for self and in the name of a minor child. The individual might be salaried employee or self-employed or any other person.
- PPF account can be opened with the State Bank of India, or its associates or any other Certified Nationalized Bank and select private sector banks such as ICICI Bank, Axis Bank. PPF account can also be opened at post-office.
- PPF account is opened for a minimum period of 15 years. This tenure can be further extended for a minimum term of 5 years.
- Premature closure of account is allowed in certain cases after completion of 5 years.
- In a financial year, an investor can deposit minimum of Rs.500 and maximum of Rs.1,50,000/- in their PPF account.
- Government pays yearly interest on the balance in the PPF account. Interest earned in the PPF account can only be redeemed after maturity.
- PPF deposits come under the EEE (Exempt, Exempt, Exempt) tax category. The deposit amount, interest and withdrawal are fully tax exempt.
- Deduction U/s 80C of Income Tax is available for the amount invested in PPF upto Rs. 1,50,000/-
- Amount in PPF can be withdrawn partially starting 7th year onwards
- Loan against the balance in PPF account can be availed after three years.
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