As the deadline for income tax returns approaches, income taxpayers are busy finding ways to avoid income tax. In this context, section 80C of the Indian Income Tax Act has also come under scrutiny. Under Section 80C, income taxpayers will get a rebate of up to Rs 1.5 lakh per annum if they invest in certain projects. One such project under Section 80C is the Public Provident Fund (PPF).
Public Provident Fund
On 16 May 1986, the PPF brought the National Savings Institute under the Union Ministry of Finance. The purpose is to provide millions of workers in the unorganized sector outside the scope of the Provident Fund to provide them with small savings and tax breaks. That’s the beginning. In 2019, the PPF changed in the open.
The rules of PPF are very straightforward. Any Indian citizen can open a PPF account in his / her own name or in the name of a minor at selected branches and post offices of 16 banks including State Bank. However, only one PPF account can be opened in one name. Accounts cannot be opened in the name of Hindu Undivided Family or in the joint name.
According to the law of 2019, a PPF account can be opened with a minimum of 100 rupees by filling a specific application form with Aadhaar card, PAN card, address certificate and passport size self-portrait. Money can be kept in the account as many times as you like in a financial year. However, in all, one and a half lakh rupees cannot be kept in one financial year. You have to keep at least 500 rupees every financial year.
But what is the benefit of keeping money in PPF?
Firstly, up to Rs 1.5 lakh per annum deposited in the account will be exempted under Section 80C of the Income Tax Act and no tax will be levied on the interest earned.
Secondly, there will be more interest here than fixed deposit in the bank. The center determines the interest rate for every three months. For the first quarter of the 2021-22 financial year (April to June), the interest rate is 7.1 percent. Note that the interest rate on National Savings Certificate (NSC) is 7.6 percent and the interest rate on five-year savings at post office is 7.6 percent.
According to the Government Savings Bank Act, 1983, no court can confiscate money from a PPF account. Loans can also be taken from PPF accounts. As per the rules, loans are available from the third to the sixth year of account opening. This loan has to be repaid within 36 months.
In whose name he can nominate the account according to his choice. Anyone with a provident fund can open a PPF account.
This savings must be made for 15 years. If anyone wants to extend its term, it must do so within one year of its expiration. This extension can be up to five years. This PPF account can be easily transferred from one branch of a bank to another or from one bank to another. In the same way one can move from a post office to a bank or from a bank to a post office. The customer does not have to incur any additional cost to remove this account.
Some of the money saved from the seven years of account opening can be withdrawn. However, the loan will not match. Money can be withdrawn by closing the account five years after the opening of the account for the treatment of a terminal illness or in need of higher education.