What makes PPF a darling for tax-saving investors: explained

Saving tax while investing in high yielding investments is advantageous for a savvy investor at the start of a new fiscal year. Many investment alternatives provide income tax deductions to tax savers, with some of the more common deductions falling under Sections 80C, 80CCC, and 80CCD, among others. Therefore, by designing a better tax saving strategy, one can maximize the return on his investment option. With fiscal year 2022-23, it’s a good idea to start investing in tax-saving instruments as soon as possible to build a healthier corpus for your financial health. Therefore, investors who want to save tax while earning risk-free returns can consider investing in the Public Provident Fund (PPF), which is a mainstay among tax-saving investors.

Tax-free deposit

The Public Provident Account (PPF) has a term of 15 years, making it a suitable savings plan for long-term investors, especially those planning for retirement or a daughter’s wedding. A PPF account can be opened with a minimum deposit of 500 and a maximum amount of 1.50,000 each fiscal year. Only one account may be opened with a post office or bank by a single adult who is a resident Indian or a guardian on behalf of a minor or insane person. PPF account holders may receive tax benefits under Section 80C on deposits up to 1.5 lakh, allowing tax-saving investors with low tax regimes to benefit from the PPF.

Duty-free returns

The interest rate on the PPF is 7.1% per annum, compounded annually, and is calculated on the lowest amount in the account between the close of the fifth day and the end of the month in a fiscal year, so you should make a deposit to your PPF account every month before the 5th of each month. Interest will be credited to the account at the end of each fiscal year as the interest rate is compounded annually. Although the interest earned is exempt from tax under the Income Tax Act, the accrued amount and the interest are also exempt from tax.

Tax-Free Withdrawal and Maturity Benefit

PPF accounts have a 15 year maturity, and at maturity one can withdraw the maturity amount, keep the maturity amount in the account without depositing, and the PPF interest rate will apply or one can extend his account for another block of five years, and so on. Regarding withdrawals, a customer can make a withdrawal after five years of account opening, and the withdrawal can be made up to 50% of the total balance at the end of the previous fourth year or at the end of the previous year. previous year, according to is lower. Section 80C of the Income Tax Act exempts full or partial withdrawals from a PPF account from tax, which is another reason to invest in a PPF account for those looking forward to the benefits. EEE tax. Because the amount invested in the plan is tax exempt until 1.5 lakh every tax year, interest received is tax free and maturity benefits are also tax free, PPF is a popular tax saving option that comes with saving status Exempt Exempt Exempt (EEA) long term tax.

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