PPF or Public Provident Fund is immensely popular among the people who invest with a focus on the retirement fund. However, as per the investment experts, this investment is suitable to those investors who want flexibility in investment along with some income tax benefits. As per the tax and investment experts, PPF investment up to Rs 1.5 lakh is exempted from income tax under Section 80C while it gives 6.9 per cent return per annum.
Detailing about the returns that an investor can get while investing in PPF Kartik Jhaveri, Manager — Wealth Management at Transcent Consultants said, “PPF interest rates are decided by the central government on a quarterly basis. For July to September quarter, the PPF interest rate is 6.9 per cent 0.1 per cent lower than the PPF interest rate in the April-June quarter.” He said that PPF account matures after completion of 15 years. One may extend the term after 15 years by a block of another 5 years with or without making additional contributions. The maturity amount of PPF is 100 per cent tax-free. PPF is a 100 per cent Debt oriented product, guaranteed by the government, providing safety of capital.
Speaking on the income tax benefits under Section 80C that a PPF investor can avail in a year Manikaran Singh, a SEBI-registered tax and investment expert said, “Under Section 80C, an income taxpayer can claim tax exemption up to Rs 1.5 lakh per annum investment in PPF. However, he pointed out that Section 80C gives income tax exemption up to Rs 1.5 lakh, which includes ELSS Mutual Fund, PPF, Voluntary Provident Fund (VPF) investments as well. So, if a person is investing in other option falling under Section 80C, then he or she won’t be able to claim income tax exemption for his or her investment in PPF. In that case, he or she can claim income tax exemption on the balance left after deducting the other investment and the Rs 1.5 lakh limit.” Manikaran Singh pointed out that in PPF, an investor can’t invest beyond Rs 1.5 lakh. A PPF investor can stop his or her investment after 5 years and can withdraw the whole amount after 15 years.” However, Manikaran said that PPF is a better risk-free option but for those who are investing completely for retirement purposes, they should also invest in ELSS mutual funds, especially in small-cap funds as it gives around 10-11 per cent post-tax returns in long-term.