Monday, December 12, 2011

Tips For Maximising Benefits And Returns in PPF

  • Invest by the 5th of the month
  • Tax rebate can be availed of by investing even in the 16th year
  • Post-Maturity continuation
  • Can be self-funding after year 7
  • Interest in your PPF account is calculated on the lowest balance between the close of the fifth day and the last day of every month and is credited to the account at the end of each financial year i.e., on 31st March. So if you invest by the 5th of the month, you will be eligible to interest for the full month in which you are investing.
  • Although, PPF is theoretically a 15-year scheme, you can make your last contribution to PPF till the last day of the 16th financial year. Your contribution to PPF on the last day of the 16th year may not get any interest, but you can claim a tax-rebate on the investment amount.
  • You could choose to extend your PPF account for a period of five years at a time, after the completion of its 15-year term. Such an extension is recommended for individuals who do not need this entire amount, nor have a better investment option.
  • If you choose to extend your account, you must submit Form H if you want to claim section 80C tax benefits on fresh contributions. If you merely retain the balance in your account, without submitting Form H, you will continue to earn 8% p.a. tax-free interest until it is withdrawn.
  • If you continue with fresh subscriptions, you are entitled to withdraw upto 60% of your balance at the beginning of each extended period in one or more installments, but not more than once a year.
  • If you merely retain the balance in your account, you can withdraw the entire sum in one, or more, installments, but again, but not more than once a year.
  • The partial withdrawal facility of the PPF scheme enables you to derive the benefits of section 80C without investing any fresh capital.
  • Assuming you have decided to invest a fixed amount in PPF every year, from the 7th year onwards you can withdraw an amount equivalent to your annual investment from your accrued PPF account, and deposit the same back as your contribution for that particular year.

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