The best advice you will hear about PPF

While PPF has been a very popular savings instrument, trying to maximum your return from it can make it all the more rewarding.

Starting financial year 2014-15 a maximum of Rs 1,50,000 is allowed to be invested in a Public Provident Fund account. Deposits in PPF are allowed as a deduction under section 80C. PPF comes with the twin benefit of tax saving along with being a long term secure investment.

Deposits to your PPF account can be made at any time during the year. You should aim for making these deposits in one of the two ways mentioned below

• If you have the requisite funds try to invest Rs 1,50,000 at the start of the financial year. Amounts deposited in April will earn interest for the whole financial year.
• If making this large upfront investment impacts your cash flows, consider creating a SIP (systematic investment plan) for your PPF account from your salary Every month make a deposit of Rs 12,500 to your PPF account. You can of course adjust this amount according to your budget. It will be beneficial to make the deposit from 1^stto 5^th of a month, since interest is calculated on lowest balance in the account from 5^th to the last date of the month. You will not earn any interest for a month if you deposit after 5^th of that month. This involves a bit of planning but is worth the effort to bring some discipline into your savings. In the scenario that you are unable to make this deposit timely – let that amount sit in your savings account. And make double the deposit in the next month. Do note that in a year a minimum investment of Rs 500 is required to keep your PPF account active.

If you have your PPF account with one of the nationalized banks, you may have to maintain a physical pass book, and get it updated by visiting your bank.

PPF account earns an interest of roughly 8.7%. This interest is entirely tax free and is better than what most FDs earn these days. Interest earned on fixed deposits is fully taxable.

The PPF account matures after 15 years. Receipts on Maturity or withdrawals are tax free. Money is allowed to be withdrawn after 5 years after some conditions are met. So PPF account falls in the EEE category of investments, where the investment is exempt, returns are tax exempt and so are the receipts on maturity.

It’s only been a month since the new financial year started and if you haven’t planned your PPF investments, do so now. Make the most of PPF and the deduction under section 80C.