Listed below are the salient features and benefits of PPF.
Extended Lock-In Period:
One of the biggest benefits of PPF is that it encourages disciplined long-term savings by having a 15-year lock-in period. This means the funds in your PPF account can only be withdrawn upon maturity, which ensures you stay committed to your financial goals. However, in specific circumstances, premature withdrawal is permitted, though it may incur a penalty ranging from 0.5% to 3% of the interest rate. Furthermore, this structure makes PPF ideal for individuals who wish to cultivate a secure financial habit while saving for the future.
Steady Returns with Zero Risk:
As a government-backed scheme, PPF offers steady and reliable returns, which makes it an excellent choice for risk-averse investors. The interest rate, reviewed quarterly by the Ministry of Finance, ensures that your investment grows consistently. Furthermore, this stability attracts both small-scale and large-scale investors who are looking for a safe option to diversify their portfolios or build a retirement corpus.
Tax Exemptions Across the Board:
PPF is one of the few investment schemes that offers a triple tax advantage. Contributions of up to Rs. 1.5 lakhs annually are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Moreover, the interest earned and the maturity amount are completely tax-free, which makes it a highly tax-efficient savings tool.
Loan Facility Against PPF Balance:
PPF account holders can also use their accumulated balance as collateral for a loan. Starting from the 3rd financial year of the account, you can borrow up to 25% of your total balance. The loan comes with an attractive interest rate of just 1%, which makes it a cost-effective way to access funds without breaking your long-term savings.
Flexible Investment Limits:
Last but not least, PPF accommodates both modest and substantial contributions. The minimum annual investment is just Rs. 500, which ensures accessibility for all income groups. On the other hand, the maximum allowable investment per financial year is capped at Rs. 1.5 lakhs, which may enable significant savings while staying within tax-benefit limits.
