Liquidity Considerations in PPF or ELSS

The tenure of PPF is 15 years and is extendable in blocks of 5 years. While liquidity of PPF is lower than other tax saving fixed income investments, PPF does offer limited liquidity options through withdrawals and loans, during the term of the investment. Withdrawals not exceeding 50% of fourth year balance or 50% of the balance at the end of the immediate preceding year, whichever is lower, are permitted after a lock-in period of 7 years. PPF also offers loan facilities from third year onwards under special circumstances. The loans can be availed between third and sixth year, and … Click here to continue…..

Should we invest in PPF or ELSS

Both PPF and ELSS have their merits and demerits. Your investment choice should be informed by your investment objectives and your risk tolerance level. Your risk tolerance level is based on several factors (discussed in our article Measuring Risk Tolerance of Investors). Age and financial situation are certainly two important factors that determine risk tolerance of an investor. Investors with high risk tolerance should invest in ELSS, while investors with low risk tolerance should invest in PPF. Over a long time frame wealth creation potential is much higher with ELSS, as we saw in the charts above. Young investors should … Click here to continue…..

How to earn maximum interest in your PPF account

The Public Provident Fund (PPF) is one of the most popular tax-saving schemes. It can also be a very good investment option for retirement planning and but many of us treat it as just a tax-saving tool. Till the accounts department sends us a reminder for furnishing tax-saving documents, we don’t think much about it. How PPF interest is calculated: The interest on PPF account is no longer fixed and is now pegged to yield on government bonds. For this fiscal year (2013-14), the government will pay 8.7 per cent. The interest on balance in your PPF account is compounded annually … Click here to continue…..

Seven facts about PPF accounts

The key to wealth creation lies in the practice of saving regularly and systematically. The public provident fund (PPF) is one such long-term investment option that would suit investors of all types. Scoring high on safety, by virtue of it being government backed, this wonderful option comes with tax benefits, loan options and a low maintenance cost. Investment Yogi explains seven must-know facts of a PPF account to make it more profitable for you. It requires just Rs. 100 to start a PPF account: PPF accounts could be opened by individuals, whether salaried or self-employed, with a minimum initial deposit … Click here to continue…..

What about PPF for HUFs?

The rules applying to HUF’s PPF accounts have been modified with effect from May 2005. While earlier an HUF could open a PPF account and save tax on the deduction, this has now been stopped. The rule states that: “As per GSR 286(E) dated 13.5.2005 circulated vide SB Order 10/2004 dated 23.6.2005, only individuals can open PPF account from 13.5.2005. A further clarification was issued vide then DDG (FS) D.O. letter No. 113-10/2004-SB dated 5.9.2005 and again reiterated vide SB Order No.20/2005 dated 14.11.2005 vide which it was conveyed that existing PPF accounts opened in the name of HUF would … Click here to continue…..

What about nominations?

It’s very important to ensure that you have a nominee on your PPF account, who in the event of your death will receive the PPF corpus. You can nominate one or more persons to receive the amount standing to your credit in the event of your death. Use Form E to make initial nominations, and if you wish to later change them, use Form F. If you nominate a minor, then you should also appoint somebody to receive and hold the PPF funds until the nominee attains majority. For nominees to apply for funds in case of the death of … Click here to continue…..

Is it true that if I open an account in my minor child’s name and I also have my own PPF account, that I am only eligible for Rs. 1 lakh exemption totally for both accounts?

Yes, this is true. Considering that your child is a minor, you as the parent / guardian are not entitled to dual exemption of up to Rs. 2 lakhs, the exemption limit remains at Rs. 1 lakh for a minor child. However, if you open an account in your spouse’s name, you are eligible for a secondary deduction on the amount invested in her name. As the PPF interest earned is tax free, there is no concern of clubbing of income as there is no tax to be paid on the PPF interest.

Is it true that as an NRI, I can’t open a PPF account?

Yes, this is true. The rule of 25th July, 2003 states that ‘Non Resident Indians are not eligible to open an account under the PPF Scheme’. But there is a silver lining for some NRIs. If you already had a PPF account, when you were resident in India, and during the tenure of the PPF account you became an NRI, then you are eligible to continue investing in the account until it matures, but on a non repatriable basis. The rule states is as follows: ‘Provided that if a resident who subsequently becomes a Non Resident during the currency of … Click here to continue…..