Wednesday, 22 December 2010

More about PPF, the Safest Investment Option

Public Provident Fund is the best tax saving instrument because the income from PPF does not attract tax as per the current income tax rule. One can deposit the maximum amount of Rs. 70000 in Public provident fund. PPF gives you 8% tax free interest and if we calculate tax for this for a person in 10% tax bracket will get  8.82%, in 20% tax bracket will get 9.65% and in 30% tax bracket will get 10.47%. So invest the maximum limit every year irrespective of you tax saving limit.

PPF is a good long term investment and you can invest in PPF account for satisfying any long term goal such as education of your children, Marriage of your children, purchasing a residential house or for retirement purpose. Normally PPF is for 15 years, but you can extend it for long time in each five years block and can earn same tax free interest, but should not forget to deposit the minimum amount (Rs. 500) every year.

The PPF interest is calculated monthly for the lowest balance between 5th and the end of the month. So keep in mind to deposit before 5th of the month which you wish to deposit to avail the interest for the month.

You can withdraw from PPF account in any emergencies, but do it only in emergencies so that the long term deposit should be the least preference for withdrawal. But take care that if you need loan with more interest, withdraw money from PPF is better. You can withdraw money from PPF account after 6 years of commencement of PPF account and the withdrawal money is limited to 50% of the balance preceding two years of withdrawal.

PPF account is a good and safe investment instrument and if you wish to create wealth with risk free investment go for PPF account and deposit maximum amount every year.

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  1. [...] tax of the income also. For this purpose you can invest wisely in any investment scheme which has no tax for the income from such investment, or the investment with less taxability or an investment with [...]