PPF Account Benefits - Know PPF Tax Benefits Online

The Public Provident Fund, or PPF, is one of the most popular savings-cum-investment products in India. They are ideal for risk-averse investors who are also seeking long-term capital appreciation. In addition, PPF’s tax benefits on both investment and returns make it a compelling choice. Let's discuss some of their benefits.

Risk-free Returns

The Government of India backs the Public Provident Fund. This makes them entirely risk-free investment options. The returns, too, are guaranteed by the government. What’s more is that the funds in your account cannot be attached by even a court order to pay off debtors.

Multiple PPF Tax Benefits

Another benefit of a PPF is its exempt-exempt-exempt (EEE) tax status. The amount you invest up to Rs. 1,50,000 is deductible from your taxable income, the interest you earn is non-taxable, and the maturity amount you get after 15 years is also tax-exempt. This makes it one of the most tax-efficient investments. You cannot enjoy this benefit with any other investment option in India.

Small Contributions

The PPF allows flexibility in the investment amount. You can open an account with as little as Rs. 100. Every year, you can invest a minimum of Rs. 500 and a maximum of Rs. 1,50,000. You can make these investments in 12 instalments or as a lump sum. Currently (for Q2 of FY 2024-25), the PPF offers an interest rate of Rs. 7.1%, compounded annually.

Hat tip: Always make your investment before the 5th of every month to maximise your returns. You can earn the highest return if you invest the entire Rs. 1,50,000 at the start of the financial year (before April 5 every year).

Liquidity and Loan Facilities

Although the PPF has a 15-year lock-in period, you have many options to make use of the funds in your account. You can take a loan (up to 25% of the balance available at the end of two years preceding the year in which you apply for the loan) between the third year and the sixth year. You must repay the loan in 36 months, the interest rate of which is 2% higher than the interest you earn.

From the seventh year, you can make partial withdrawals from your account. Besides partial withdrawals, you can prematurely close your PPF account if you need the funds for severe medical treatment or for higher education.

Tenure Flexibility

When your PPF account matures after 15 years, you have two options – withdraw the entire amount or extend the tenure in blocks of five years. When you withdraw the entire balance, including the money you have invested over the years and the interest it has earned, your PPF account will be closed.

If you don’t need the money right away, you can choose to extend the tenure of your PPF account. This can be done in blocks of five years. During this extended period, you can continue to make deposits and earn interest on your balance. You also have the flexibility to withdraw money from your PPF account once a year during this extension period.

Convinced about PPF account benefits already? Read more here about how to open a PPF account with HDFC Bank.

Don’t forget to read up on these rules of the PPF Account.

To open your HDFC Bank Public Provident Fund, click here to start.

* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice before you take any/refrain from any action.