Despite the various investment opportunities available in the country, the demand for small savings schemes, also known as post office schemes, remains distinct. The primary reason for their popularity is the backing of the central government, alongside additional benefits such as guaranteed returns and tax incentives. While not all schemes offer tax benefits, the promise of good long-term returns with a secure guarantee makes them a favourable choice.
The most prominent of these savings options is the Public Provident Fund (PPF) Scheme, which is particularly favoured by employees. The central government revises the interest rates for these small savings schemes every three months, but this time, the rates have remained unchanged for the July-September quarter, with the PPF interest rate standing at 7.10 per cent annually.
The PPF account tenure spans 15 years, with a minimum annual investment amount of Rs. 500 and a maximum of Rs. 1.50 lakhs. It’s important to note that Hindu Undivided Families (HUF), trusts, and Non-Resident Indians (NRIs) are not eligible for this scheme. Minors can have a guardian open an account on their behalf, available through both post offices and banks.
For PPF accounts, deposits can be made in any number of instalments within a financial year. Failure to make the minimum deposit of Rs. 500 in a year will result in the account being suspended, requiring a Rs. 50 penalty to reactivate. Interest is calculated monthly, based on the balance as of the 5th of each month, and is credited to the account at the end of every financial year. Additionally, the scheme offers a loan facility, allowing for loans to be taken after being a member for a specific period.
One of the most significant benefits of the PPF scheme is the triple tax exemption, which covers deposits, interest income, and maturity returns. Under Section 80C of the Income Tax Act, a maximum exemption of Rs. 1.50 lakhs is available in a financial year. Moreover, the scheme can be extended in blocks of 5 years after the initial 15-year tenure, providing the opportunity for higher returns.
When considering the use of a PPF calculator, it becomes apparent that the scheme has the potential to yield substantial returns. For instance, a monthly deposit of Rs. 5,000 over 15 years would result in a total investment of Rs. 9 lakhs, which could grow to Rs. 16,27,284. These figures demonstrate that the PPF scheme has the potential to yield significant returns over time.
