PPF Archives -

Which is Better for Retirement – PPF or NPS?

Fri, 30 Apr 2021 06:34:47 +0000

The Buyt Desk

After retirement, along with the availability of surplus money in your bank account, you require a constant incoming stream of money. Public Provident Fund (PPF) and National Pension Scheme (NPS) are both Government-backed schemes. Both schemes provide reasonable and guaranteed returns after the tenure. However, the question is which one is a better scheme for a retired individual. The answer is not straightforward. It depends on what do you seek to achieve from your investment. Do you want to receive a big lump sum amount in your bank account when you retire or do you want a regular and fixed income in form of a pension or both? Are you ready to take a moderate risk with your capital or not? How much time, effort, and research are you ready to put into deciding your choice of investment.

Here, we compare the features of PPF and NPS to help you choose between them.

Returns: PPF has a fixed rate of interest that the Government revises every quarter. The current rate of interest is 7.1%. NPS is market-linked, thus, it does not have a fixed rate of interest. Usually, after its tenure, it provides approximately an 8 to 10% return rate.
Lock-in period: PPF has a lock-in period of 15 years. If you wish, the tenure can be extended, with or without contribution, in blocks of 5 years. Even a minor can have a PPF account. In the case of NPS, the corpus is accumulated until you reach the age of 60 years. You can extend the maturity of the scheme up to 70 years of age.
Payment: In the case of PPF, the accumulated wealth is paid at the end of the tenure unless you extend the scheme. NPS provides the accumulated wealth as a pension after you are 60 years old. If you want, you can withdraw 60% of the wealth as a lump sum amount and the remaining 40% will be paid as a pension.
Risk: PPF is a completely risk-free investment. NPS carries low to moderate risk because it is a market-associated investment. You can choose the NPS category as per your risk-taking capacity. In every category, some amount is invested in the equity market.
Inflation: PPF does not provide cushioning against inflation. Thus, every year the rate of return will be lower. In the case of NPS, some money is always invested in the equity market, which can provide safety against inflation.
Taxation: Both PPF and NPS enjoy the tax benefit provided under section 80CCE of the Income Tax Act i.e. tax deduction up to Rs.1.5 lakhs. However, NPS gives an extra tax benefit of additional tax deduction up to Rs.50, 000 under section 80CCD1(B) of the IT Act.

Diversification is a well-known fact in investment. Instead of choosing to put all your money in either NPS or PPF, you can invest some amount in both schemes. We are here to provide you complete financial information. However, for financial advice, do consult a certified financial expert.

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How to Open a PPF Account in a Bank?

Mon, 08 Mar 2021 13:23:20 +0000

The BuyT Desk

If you have been thinking about opening a Public Provident Fund(PPF) in a bank then you must hold an account in that bank. Nowadays banks have made it very easy to follow and track the account. Before we tell you how will you open the account lets understand how does PPF account work.

How PPF works?

A Public Provident Fund(PPF) is a saving cum investment account. It is like a fixed deposit with a lock-in of 15 years. You can make a payment of a minimum of Rs 500 and a maximum of up to Rs 1.5 lakh in a year. You earn interest on your PPF deposit. The interest on PPF is revised every quarter but interest is added on a monthly basis which gives the befit of compounding to the investor. The credited interest gets added to the principal and then interest is earned on the entire amount. At present, PPF is earning interest at 7.10% until March 2021.

Maturity & Tax Benefit of PPF

PPF matures only after 15 years but there are options when the partial withdrawal is allowed. There is the provision of premature closure too. One can close the PPF after 5 years of account opening on the grounds of a medical emergency. The PPF contribution is tax-free and can be claimed as a deduction under section 80C of the Income Tax Act. The amount received at the time of maturity of PPF is also tax-free and even the interest of PPF is tax exempted. The contribution made towards the PPF account of a spouse or a minor is also tax exempted but do keep in mind that you can’t get any exemption beyond the Rs 1.50 lakh limit of section 80C of the Income Tax Act.

Must-Have for opening a PPF account in a bank

PPF account can be opened at post office and banks. If you want to open a PPF account in a bank then this is what you must have.

You can either visit the bank branch or open an online PPF account by using the digital platform of the bank through Netbanking/ or the mobile app of your bank.

Most of the public banks such as State Bank of India & Punjab National Bank have both online and offline service of PPF account. Even the major private banks like ICICI bank, HDFC bank and Axis bank are giving you the facility of PPF account.

You must have a savings bank account with the respective bank and must activate internet banking if you are planning to open your PPF account online.

Your bank account must be linked to your Aadhar number. Your phone number liked to your Aadhar must be active so that you can reeve the authorisation OTP and instantly e-authorise.

You need to physically submit your KYC related document proof along with the filled PPF request form. You will get time to submit these documents.

Documents that should be ready

Identity Proof

PAN details

Aadhar number

Address proof

Passport-sized photograph

Salary slip

Hope we have simplified the steps for you. If you have been looking for along term investment that is safe, saves your tax and gives a return on your investment then PPF could be that answer.

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8 Things you must know about your PPF Account

Tue, 02 Mar 2021 12:19:04 +0000

The BuyT Desk

Public Provident Fund (PPF) is one of the most popular small saving schemes and is considered a good and safe investment. PPF gives you the benefit of compounding interest on your invested capital. Here are 8 things that you must know about your PPF-

1. Interest is fixed but the rate is not fixed

You will get an assured return but the rate of interest on PPF may vary from quarter to quarter. It is revised every 3 months. However, the interest rate or the FY 2019-20 has remained constant at 7.1% all throughout the year. The interest rate of PPF is linked to the 10-year government bond yield. It is decided on the basis of the average bond yield of the last three months. There has been a steady decline in the 10-year bond yield in the last two years. This has had an impact on PPF.

2. PPF can be extended beyond maturity

Public Provident Fund account matures in 15 years. When the account is matured, you have the option to withdraw the entire balance and close the account. But, if you want to increase the contribution, then the account can be extended for a block of 5 years.

3. Pre-mature Withdrawal

A PPF account comes with a maturity of 15 years. But there is provision for pre-mature withdrawal after the completion of 5 years. You can withdraw 50% of the balance of the fourth year or 50% of the balance of the preceding year whichever is lower.

4.Loan against PPF

You can take a personal loan against the balance of your PPF at a nominal interest of 1%. If the account has not completed six years, then you can take a loan from 3 years to 6 years. The loan can be taken up to 25% of the balance till the end of the last financial year. It has to be repaid in 3 years. If the loan is not repaid, the investor cannot take another loan.

5. How much to deposit?

The minimum amount that you must deposit in a PPF account in a year is Rs 500 and the maximum limit is Rs 1.5 lakh. If you do not make a minimum investment of 500 rupees then your account can become dormant. To reactivate the account you will have to pay a penalty of Rs 50.

6. Can I have two PPF account?

Yes, you can open another account in the name of your spouse or minor children. But you can’t invest Rs 1.5 lakh in each of your accounts. The limit of investment in PPF is Rs 1.5 lakh in a year and you can’t cross this threshold. The aggregate of multiple accounts has to be within the limit of Rs1.5 lakh.

7. Why you must make your deposit before the 5th of every month

The Public Provident Fund offers compound interest annually. However, its calculation is done every month. Interest is available on the lowest balance from the 5th to the last date of the month. If you invest before the 5th, then you will get the interest on your deposit for that month but if you deposit post 5th then you may lose the interest on the deposit made post 5th.

8. Tax-free

PPF comes under the exempt-exempt-exempt category. There is an exemption of up to Rs 1.5 lakh under Section 80C on investment in Public Provident Fund. There is no tax on the interest earned and withdrawal at maturity is also tax-free.

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