Saving income tax is one of the top priorities when it comes to salaried individuals. However, not many of us are aware of the fact that there are multiple ways to save taxes and not just pay it out right. Not only saving taxes under different sections of the income tax act helps you build a corpus for your retirement but also allows you to get substantial exemptions. It is important that you understand the different scenarios where you can save taxes and get ahead with your savings for retirement.
How do you save income tax using PPF?
Section 80 C is probably one of the only areas which allow you to save tax up to 1.5 lacs. It is easy, simple and one of the most diverse options where you can invest your hard-earned money on several platforms.
The public Provident Fund is one of the sections which allows you to save the entire amount in one single go. It is effective, gives you great interest rates and is one of the most common ways to go about when tax saving is concerned. Not only you can plan your retirement well, but also get the most out of the investment that goes into this government scheme.
The Public Provident Fund has a minimum lock in period of 15 years which is essentially one of the most peculiar features when it comes to building that moolah for a long-term goal such as getting your children educated or even buying that dream house or even getting your kids married. After the lock-in period is over, you can still extend the maturity period by 5 years in bulk at a time and continue until you want it to stop.
If you are one of those people who invest before the 5th of every month, you get the maximum possible interest and returns compared to others who invest say after the 5th or even in the middle of the month! Isn’t that how generic banking works?
Why do you need a PPF calculator?
A robust PPF calculator allows you to find out how much your investment is worth. The return and the interest rates define the total maturity benefit that you are entitled to in general. Given that PPF is compounded annually, it is important that you keep your financial goals in mind and calculate the per month investment amount such that it helps you achieve better benefits.
Let’s look at this way. you can deposit a maximum of 1.5 lakhs for 15 years. Given that the current interest rate is slightly above 7 percent or 7.6% to be precise, you get an annual interest on the amount invested. This adds up to your corpus and snow balls after that. This calculation is applicable only if you make a deposit before the 5th of every month. For investors who tend to deposit the money after the 5th of every month, the interest paid out is slightly lesser than the former.
The advantages are too many to overlook in general. You can make deposits in a lumpsum or just like a SIP every month at a specified date. You can open the account in any bank given that you deposit the amount in either cash or cheque. All you need to do is fill out a form and head over to the bank for validation. Once the documents are verified, you can make an initial deposit through cash or cheque whichever is convenient and get your account open for business.
What are the benefits?
Did you know opening a PPF account is completely free? Yes, it totally is. So is the interest. No, it’s not free, but it is not taxable. That means you get the entire amount invested back and that interest without any deductions. You can open an account on behalf of your kids and invest a lump sum amount in the same but the lumpsum amount you claim for rebates has to be the cumulative sum and shouldn’t be higher than the destined limit.
There is no provision for the closure of the account before 15 years. However, you can avail loans on the deposits after 3 years after the opening of the account. The interest that you get is calculated between the 5th of every month and the last day of the month.
The generic cycle of interest getting credited to the PPF account is usually when the bank closes in March. Financial year starts on the 1st of April and thus the disbursement of interest is made on the last day of March to make it simpler. Also, interest calculation becomes easier that way. PPF is a long-term savings option and one needs to be very careful to tread the line.
The minimum amount that can be deposited in the bank is as low as 500INR. Therefore, you can have a PPF account working for all income groups. Additionally, the interest rate is higher than most of the savings bank account and it seems perfect to be treated as one of the savings accounts or those you call for retirement.
You can get a partial withdrawal request processed in case you wish to draw the sum before maturity. You can also apply for an extension of the account if need be. It is all hassle free and it just makes it one of the most popular savings options after the fixed deposit scheme which is slowly losing its charm due to deflated interest rates.
Wrapping it up
Even if 80C gives you multiple options such as saving for the long term through ELSS or fixed deposits or similar options, you can always fall back on the good old Public Provident Fund because it is way too safe and there are no possible market related losses associated with it.
It is not subject to fluctuations or volatility and keeps your money safe and sound. Given that it is a Government undertaking, it doesn’t get any better than this. So, what are you waiting for? Head over to your nearest bank now for the best investment option available under the Income Tax Act.
