BIM for Public Provident Fund (PPF) is one of the most common and the safest government-backed tax-saving investment BIM instruments. Both salaried as well as non-salaried resident individuals can invest in PPF as against Provident Fund (PF), which is for salaried people only. A PPF account can be opened in a post office or a bank.
PPF has a lock-in period of 15 years, which starts BIM from the beginning of the first financial year. The interest rates on PPF keep on changing every year and normally stay around @ 8%. “PPF returns are compounded annually. This means interest would be earned on your second year’s deposit and the first year’s interest as well. The minimum amount that needs to be deposited every year to keep your PPF account active for 15 years is Rs 500. However, a restriction of Rs 150,000 has been placed in respect of the maximum amount that can be deposited during a year,” says CA Abhishek Soni, Founder, tax2win.in.
PPF is one of the tax-friendly saving instruments. It falls in the category of EEE (Exempt Investment, Exempt Return, Exempt Maturity or Withdrawal). In simple words, you get a tax deduction under Section 80C for the amount you invest every year in the PPF account. In addition to that, the interest on the amount invested is also tax exempt. Moreover, the amount you get at the maturity is also tax exempt. Thus, both the deposits and withdrawals are totally tax free.