PPF Tax Benefits & Features
PPF contributions made every year are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The deductions can be claimed by anyone for the same limit. The deduction limit for PPF deposits was Rs.1 lakh which has been increased to Rs.1.5 lakhs from FY 2019-20.
PPF accounts also have a maximum deposit limit of Rs.1.5 lakhs per year, therefore, all deposits made to your PPF account can be claimed as deductions u/s 80C. Section 80C allows for a maximum deduction of Rs.1.5 lakhs per year inclusive of all investment instruments.
PPF accounts also offer other tax benefits. Interests earned from PPF deposits are tax-free, while wealth tax is not applicable on PPF accounts and proceeds. Therefore, PPF accounts offer you triple exemption benefits - deduction on deposits, tax-free returns and no wealth tax.
Tax Benefits You Get When You Invest in Public Provident Fund
The following are the tax benefits that you can avail yourself of when you invest in PPF:
- Public Provident Fund is an investment which comes under the Exempt-Exempt-Exempt (EEE) category.
- This means that the deposits that you make in the Public Provident Fund will be deductible (Section 80C of the Income Tax Act).
- The amount that you accumulate and the interest will be exempt from tax when you withdraw the money.
- You should note that you cannot close a Public Provident Fund account before maturity.
- You cannot close a Public Provident Fund account prematurely.
Investments that are made under a PPF account come under the Exempt-Exempt-Exempt (EEE) category. Therefore, under Section 80C of the Income Tax Act, all deposits made towards a PPF account are tax exempt. The amount that has been saved as well as the interest that has been generated are also exempt from tax when the individual withdraws the amount from the PPF account.
Tax Saving Through PPF
Suppose your yearly income is Rs.6 lakhs. Your benefits with and without claiming deductions under Section 80C will be as follows:
With deductions | Without deductions | Income |
Rs.6 lakhs | Rs.6 lakhs | |
Exempted income | Rs.2.5 lakhs | Rs.2.5 lakhs |
Deductions u/s 80C | Rs.1.5 lakhs | - |
Taxable income | (6-2.5-1.5)=Rs.2 lakhs | (6-2.5)=Rs.3.5 lakhs |
Income tax (@ 20%) | Rs.40,000 | Rs.70,000 |
Cess (@ 3%) | Rs.1,200 | Rs.2,100 |
Net tax | Rs.41,200 | Rs.72,100 |
As you can see, by investing in a savings instrument like PPF, you can potentially save Rs.31,900 in income taxes every year. And this does not include the benefits on the interests that you earn while staying invested in PPF. As such, PPF investments are a great opportunity at long term savings for everyone.
How to claim deductions on PPF investments
The process of claiming PPF investments as deductions under Section 80C involves submitting the details of the PPF investments made in a year in your income tax returns. There is a section for exemptions under 80C and you can enter the amount invested by you to claim deductions, along with supporting documents.
PPF Top Pages
- PPF
- PPF Balance
- PPF Online Payment
- PPF Deposit Limit
- PPF Calculator
- PPF Rules
- How to Open PPF Account Online
- PPF Interest Rate
- PPF Account Opening Form
- Change Nominee Name in PPF
- PPF Withdrawal Rules
- Axis Bank PPF Account
- Bank of Baroda PPF Account
- Central Bank of India PPF Account
- Union Bank ppf account
- PPF Claim Status
- PPF Closure Form
- Check PPF Account Statement
FAQs on PPF Tax Benefits & Features
- What is the list of documents that are needed when opening a PPF account?
The list of documents that are needed to open a PPF account is Nomination form, Copy of PAN card or Form 60-61, Form A or PPF account opening form, Photograph (passport size) and Residence and ID proof as per Know Your Customer (KYC) standards.
- Can women change the name on the PPF account after marriage?
Yes, women would be able to change the name on the PPF account after marriage. However, necessary documents must be submitted.
- Is it possible for individuals to hold more than 1 Public Provident Fund (PPF) account?
No, individuals can have only one PPF account under their name. However, they can open another account on behalf of a minor.
- Is it possible for individuals to transfer their PPF account to another person?
No, individuals cannot transfer their PPF account to another person. Similarly, nominees cannot continue the PPF account under their names in case the account holder has passed away.
- What is the maximum amount an individual can invest towards PPF in a year?
The maximum amount an individual can invest in a year towards PPF is Rs.1.5 lakh.
- Is the PPF amount that is received on maturity tax-free?
Yes, the PPF amount that is received on maturity is tax-free. Under Section 80C of the Income Tax Act, 1961, any investment made towards the PPF account is tax-free.
- How many contributions can be made towards the PPF account in a month?
In a month, individuals can make up to two contributions towards the PPF account. The maximum number of contributions that can be made in a year is 12.
- Is it possible for Non-Resident Indians (NRIs) to open a PPF account?
No, NRIs are not allowed to open a PPF account.
- Is it possible for minors to open a PPF account online?
No, minors are not allowed to open a PPF account online.
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