Tax Saving Tuesday: PPF
Introducing the first of our series on tax-saving instruments
As we saw in last week’s newsletter, tax-saving schemes help the government save funds. It also allows them to guide the financial behaviour of citizens, and redirect funds towards economy-boosting activities.
As informed investors, we should know exactly how to invest our money to make the most of tax-deductions under Section 80 of the Income Tax Act. To help with this, we’ll be picking a different tax saving instrument every week and exploring it in depth.
Welcome to Tax Saving Tuesdays! Today, we will be looking at one of the safest tax-saving choices - Public Provident Fund (PPF)
A broad overview of PPF
PPF is a government-backed savings and investment scheme established under the Public Provident Fund Act of 1968. It has a lock-in period of 15-years, with partial withdrawals allowed after the 7th year, subject to certain conditions.
The 15-year lock-in especially highlights of the benefits of compounding. For example, here’s what your returns will look like if you invest just ₹500 monthly in a PPF, and current rates hold. That’s a return of over 150%!
PPF investments are eligible for tax benefits under Section 80C of the Income Tax Act. And interest gains on your PPF investments are tax-free as well.
To understand the purpose of this scheme, a key point to note is that PPF is government-backed. This means that any investment you make goes directly to the government’s coffers. This helps the government invest in large projects in infrastructure and other key sectors.
How PPF interest rates are determined
PPF rate changes are determined largely based on the previous quarter’s yield of benchmark government securities, though it is finally determined by the government.
PPF is an especially popular choice among people looking to build a retirement fund.
Depending on your investment goals, whether you’re looking to save tax or save for the long-term, you may find it a worthwhile option to explore.
That’s all for today, see you here next week!
Stable Money Updates
1. We recently received our Online Bond Platform Providers License (OBPP):
We are now one step closer to becoming a multi-asset platform and the go-to platform for retail investors with a fixed-returns investment strategy!
2. Utkarsh SF Bank now supports Netbanking:
Now you can book Utkarsh FDs worth up to ₹10L each, on Stable Money! No more holding back on our most popular FDs because of UPI limits.
Best,
Team Stable Money
Disclaimer - This content is for educational purposes only and the content has been gathered from various sources.