Safe haven, secure returns

PPF is a good instrument for investors as it lets flexibleness and taxation benefits.

Investor: There are a batch of options under subdivision 80 C. Which, according to you, is the best one?

Advisor: Though it will differ from investor to investor, in my view, Populace Provident Fund or PPF is among the best instruments under subdivision 80C.

Investor: How makes one unfastened a PPF account?

Advisor: You can open up an business relationship in your ain name or in the name of a minor, if you are the guardian. An business relationship can also be opened on behalf of a Hindoo Undivided Family (HUF). You can also have got a separate PPF account, in malice of having an Employees' Provident Fund (EPF) account.

However, you can have got only one PPF business relationship in your name. Account can be opened with a at State Depository Financial Institution of Republic Of Republic Of Republic Of India or Depository Financial Institution of India, Central Depository Financial Institution of India and Depository Financial Institution of Baroda as well as and at any caput station business business office or general station office.

Investor: What is the continuance of the account?

Advisor: On paper, it is a 15-year account. However, the term of office actually works out to 16 years, since you can do a part in the 16th twelvemonth also.

Investor: What is the lower limit balance to maintain the business relationship alive?

Advisor: Not less than Rs 500 and not exceeding Rs 70,000 in a fiscal twelvemonth in hunk sum of money or in episodes of Rs 10 but not more than than 12 episodes in a year.

Investor: How are tax returns decided on PPF?

Advisor: The involvement is fixed by the government. At present, it is 8 per cent compounded annually. To acquire the upper limit returns, do sedimentation in the first few years of the month.

Investor: Are backdowns possible?

Advisor: The full amount can be withdrawn on adulthood after 15 years.

However, you can also retreat before adulthood from 7th twelvemonth onwards, but only once every year. The amount to be withdrawn should not transcend 50 per cent of the balance at the end of the 4th twelvemonth or the twelvemonth immediately preceding the withdrawal, whichever is lower. If you go on the business relationship after 15 old age and go on to deposit, you can retreat up to 60 per cent of the balance at the beginning of each drawn-out time period (block of five years). Investor: Can I acquire a loan from my PPF account?

Advisor: Yes, you can take a loan from the 3rd twelvemonth onwards. However, you cannot take a loan after you go eligible for the backdown facility. The loan amount should not transcend 25 per cent of the amount to your recognition at the end of the preceding fiscal year.

Investor: What are the taxation benefits?

Advisor: The sedimentations (even those in the name of your partner or minor children) are eligible for a taxation deduction. Interest accumulation and backdowns are also exempt from income tax, and the balance in the business relationship is exempt from wealthiness tax. For entrepreneurs, there is an added advantage as your PPF concern relationship cannot be attached by the courts, in lawsuit their business travels bankrupt. Investor: From the retirement planning point of view, how good is the product?

Advisor: PPF business relationship is the most effectual tax-saving vehicle giving you astonishing benefits because

Your money is absolutely safe. You have got the flexibleness of contributing varying amounts of between Rs 500 and Rs 70,000 a year, depending on your fiscal situation. The business relationship can be kept "alive" by depositing just Rs 500 a year. The income from PPF is fully exempt from income tax.

Investor: What are the drawbacks?

Advisor: Very few. The term of office of the PPF strategy is 15 years, which do it less attractive for aged people. Although partial backdown is allowed from the 7th year, it is limited to 50 per cent of the balance in your business relationship at the end of the 4th year.

(The author is a hired accountant)