Public Provident Fund is one of the most famous options for a secure way of investing, it is a government-backed investment. This investment option can be used for tax benefits under the income tax section in a few cases. Investment in Public Provident Fund is one of the few investments where the returns are benefited with tax exemption. Because of only this tax exemption feature, Public Provident Fund investment had become the most favourable investment among the public.
Key Features of Public Provident Fund:
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Public provident fund normally offers with an interest of 8%. This rate doesn’t change very often and the changing case is very seldom and that’s the main reason for it is becoming the most recommended options for investment. There is safety assurance and also principal of decent refund.
Investors can deposit any amount between 500 to Rs 70000 per annum. The investors can also pay any amount anytime in a year according to the condition that the investing provident fund invested in a year should not exceed Rs 70,000 and that too within 12 instalments in a year tenure. The tenure period of deposit is 15 years. However, you can extend this in a block of 5 years every time you want to extend. After 7 years, you have chance of withdrawing 50% of the amount invested for first four years. At the same time, you can get loan up to 25% of the deposit between third and sixth year. The investment is safe from any personal liability. Hence no institution can touch Public Provident Fund deposit against your liability.
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Public provident fund account can be opened in either in nationalized or private banks and post offices too, Most of the banks such as State Bank of India, ICICI, Bank of Baroda, Bank Of India, and others offer public provident fund service for customers. All you have to do is to visit any of these banks and to request for a Public Provident Fund form and fill it.
A Public provident fund can be opened with your name, you can also open with names of your children’s only if they are minors, you can open it on their name so that when they become adult, you can use the accumulated provident fund for their education and health etc,
Caution and alert:
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There shouldn’t be two public provident fund accounts with your name because of that an illegal act. If there is a case that you opened two accounts and using them if the organisation came to know about this they will close one of your accounts and they will strictly impose a penalty on you. The best way would be to open in the name of your spouse and children. But when you open Public Provident Fund account in your spouse’s name, the combined sum (the total of both yours and your wife public provident fund account amount shouldn’t exceed 70,000) cannot exceed Rs 70,000 a year. For minor kids, you can open separate public provident fund account and invest a maximum of extra Rs 70,000 per annum.
You don’t have joint accounts option in public provident fund account as we have in normal bank accounts. One account can have only one holder, there can be a nominee for your account, the nominee should claim the public provident fund money immediately in case the account holder’s death.
Proper Usage of Public Provident Fund account:
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The Public provident fund is one of the best options for building wealth in long term. Some of the instructions you can take to make the most of public provident fund are as follows:
Invest the maximum amount (INR 70,000 per annum) as provident fund if you can afford. You need to deposit it in disciplined terms. Since we are habituated to think about monthly terms, make sure that you deposit in monthly intervals. you should be very consistent in making the payments of provident fund if you skip the account may be blocked. If you want to re-open it with penalties of 50-500 per year.