Public Provident fund

PPF was established by the central government in 1968 & very safe since it is backed by the government. The Public Provident Fund Scheme is a statutory scheme of the Central Government of India.

• Minimum Amount

The minimum amount you have to put into your PPF account in a year is Rs 500. The maximum you can put is Rs 70,000 per year. But one deposit with a minimum amount of Rs.500/- is mandatory in each financial year.

The deposit can be in lump sum or in suitable installments, but not more than 12 Installments in a year or you cant make two installments in a month subject to total deposit of Rs.70,000/-.

It is not necessary to make a deposit in every month of the year. The amount of deposit can be varied to suit the convenience of the account holders.

The deposits should be in multiple of Rs.5/- subject to minimum amount of Rs.500/-.

The deposit in a minor account will be clubbed with the deposit of the account of the Guardian for the limit of Rs.70, 000/-.

No age is prescribed for opening a PPF account.

• Want to buy?

The Account can be opened by an individual or a minor through the guardian. But joint account is not permissible.

Those who are contributing to GPF Fund or EDF account can also open a PPF account.

A Power of attorney holder can neither open nor operate a PPF account.

The grand father/mother cannot open a PPF behalf of their minor
grand son/daughter.

The PPF scheme is operated through Post Office and Nationalized banks.

PPF account can be opened either in Post Office or in a Bank.

• Duration

The Scheme is for 15 years.

The account in which deposits are not made for any reasons is treated as discontinued account and such account can not be closed before maturity.

The discontinued account can be activated by payment of minimum deposit of Rs.500/- with default fee of Rs.50/- for each defaulted year.

The facility of first withdrawal is available in the 7th year of the account subject to a limit of 50% of the amount at credit preceding three year balance. Thereafter only one Withdrawal in every year is permissible.

The account holder has an option to extend the PPF account for any period in a block of 5 years on each time.

The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.

One withdrawal in each financial year is also admissible in such account.

• The rate of interest is 8% compounded annually.

Interest is not contractual but rate is notified by Ministry of Finance, Govt. of India, at the end of each year.

Let's say on April 1, 2008, you invested Rs 50,000 in PPF and the same amount in NSC. On April 1, 2009, your PPF account will have Rs 54,000

• Income Tax

This investment falls under Section 80C. That means the investment is made under this section are eligible for an income deduction up to a maximum Rs 1, 00,000.

The interest on deposits is totally tax free.

Deposits are exempt from wealth tax.

The balance amount in PPF account is not subject to attachment under any order or decree of court in respect of any debt or liability.

• Transferability

Pre-mature closure of a PPF Account is not permissible except in case of death.

Nominee/legal heir of PPF Account holder on death of the account holder can not continue the account, but account had to be closed.

Account is transferable from one Post office to another and from Post office to Bank and from Bank to Post office.

Account is transferable from one Bank to another bank as well as within the bank to any branch.

Nomination is the facility available.

National Savings Certificate

The National Savings Certificate -- popularly referred to by its acronym NSC, this is a post-office savings scheme. Backed by the government, it is one of the safest investment options.

• Minimum investment

Minimum investment is Rs. 500/- with No upper or maximum limit.

NSC is sold in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. So, if you want to invest Rs 50,000, you will have to buy five certificates of Rs 10,000 each.

·         Want to buy?

You can either hold an NSC certificate jointly with someone or An Individual as well as a minor through guardian can purchase. However Companies, Trusts, Societies Non-resident Indian/HUF and any other Institutions not eligible to purchase.

And since it is a post office savings scheme, you can just approach any post office.

• Rate of interest 8% compounded half yearly.

Rate of interest 8% compounded half yearly. Let's say on April 1, 2008, you invested Rs 50,000 in NSC. On April 1, 2009, your NSC account would be worth Rs 54,080

If the rate of interest was compounded just once a year, it would be Rs 79,343.72 on maturity after six years. But, since it is compounded twice annually, it will be Rs 80,051.61.

·         Income Tax

When you invest in NSC, you get a deduction under Section 80C of the Income Tax Act. This is up to a limit of Rs 1, 00,000 and includes your investment in the Employees Provident Fund and Public Provident Fund, life insurance premium payments as well as principal repayments on your home loan.

It is being Tax Saving instrument the Rebate admissible under section 80 C of Income Tax Act.

 

Interest on NSC is taxable under the head 'Income from other sources'.

Generally, it is advisable to declare accrued interest on NSC on a yearly basis. So, over the period of six years, you could declare the interest income for each year. In such cases, it does not amount to a huge sum.

If you do not declare the interest on an accrual basis, then the entire interest earned (difference between the amount deposited and the maturity value) would accumulate in the year of maturity. You could then claim it under Section 80C, but it would be a huge amount and would be taxable at the current applicable tax rate.

Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act.

 

Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years.

 

Interest income is taxable but no TDS

 

Deposits are exempt from Wealth tax.

Facility of reinvestment on maturity is available.

·         Duration

Your money stays invested for six years from the date of investment

Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.

Certificate can be pledged as security against a loan to banks/ Govt. Institutions.

Facility of encashment of certificates is available through banks.

But there is No pre-mature encashment available.

·         Transferability

Certificates are transferable from one Post office to any Post office.

Certificates are transferable from one person to another person before maturity.

Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.

Nomination facility available.

Facility of purchase/payment to the holder of Power of attorney.