Taxpayers can deduct contributions to the PPF account from their taxable income. The investor’s PPF account’s cumulative balance includes tax-free interest.
One of the government savings programs is the Public Provident Fund (PPF), which offers significant tax advantages and guaranteed returns. According to Section 80C of the Income Tax Act, taxpayer contributions to the PPF account, in addition to LIC premia and PF contributions, are eligible for tax deduction.
The investor’s PPF account’s cumulative balance includes tax-free interest. PPF is effectively Exempt Exempt Exempt (EEE) from a tax standpoint, despite certain withdrawal restrictions and the absence of tax on withdrawals.
“In the past, PPF was governed by the Public Provident Fund Scheme of 1968, which established a maximum investment limit of Rs 1,50,000 per individual per financial year. In August 2014, the limit was increased from the previous cap of Rs. 1,000,000.
In December 2019, the Central Government canceled the PPF Scheme of 1968 and announced the Public Provident Fund Scheme of 2019, which is now governed by the Government Savings Promotion Act of 1873 with powers granted by the PPF Scheme. In any case, the greatest cap has been held at Rs 150,000,” illuminates Saraswathi Kasturirangan, Accomplice, Deloitte India.
This means that you can’t put more than Rs 150,000 into a PPF account in a single fiscal year. However, you can make as many deposits as you want into your PPF account, up to a maximum of Rs 500 per year, in increments of Rs 50 each.
Investors in PPF receive tax-free interest returns that are guaranteed. The Ministry of Finance’s Department of Economic Affairs announces the rate of return. Although the returns have decreased over the past ten years, from 8.8% in 2012-13, the fact that this is tax-exempt clearly indicates that the effective rate of return is higher. The rate currently stands at 7.1%. In addition, one of the factors that may influence the annual investment limit is the certainty of a tax-free return.
According to Kasturirangan, “the common taxpayer’s expectation from the government is an increase in the limit under Section 80C.” If that occurs, “an increase in annual PPF contribution limits would also be a welcome measure.”
