Last three months of the F.Y 2014-15. It’s high time to plan our taxes and savings. More Savings at minimum cost yet one can be puzzled with questions – How? Good news at our doors. Finally, the long time awaited demand for the increase in the limits of 80C investments is announced in Budget 2014 (10th July 2014). The maximum investment an individual can deposit in PPF Account is increased from 1,00,000 INR to 1,50,000 INR.   

About PPF

The public provident fund (PPF) is one of the tax saving instruments established by the central government. One can voluntarily open an account with any nationalized bank, selected authorized private bank or post office. The account can be opened in the name of individuals who are residents of India including minor. However, each person is eligible for only one account under his/her name. There is a lock-in period of 15 years and the money can be withdrawn in whole after its maturity period. However, pre-mature withdrawals can be made from the end of the sixth financial year from when it is commenced. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of 4th year preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.

Budget 2014: PPF Investment Limit Hiked to 150000

Let us analyze the savings one can make with the revised provisions with a max investment limit of 1,50,000 INR for a duration of 15 years.

The minimum yearly deposit of Rs.500 is required and a maximum of Rs. 1.5 Lakhs to avail the rebate under Income Tax Act. The current interest rate effective from 1^st April 2013 is 8.70% per annum compounded annually, which is also tax-free. The entire balance can be withdrawn on maturity. Interest received is tax free. All the balance that accumulates over time is exempt from wealth tax.

PPF defaults and revival at minimum cost

If any contribution of minimum amount in any year is not invested then the account will be deactivated. To activate one needs to pay Rs.50 as penalty and Rs.500 for each inactive year’s contribution.

In case death of account holder then the balance amount will be paid to his nominee or legal heir even before 5 years too. So nominees or legal heirs are not eligible to continue the deceased account. If balance amount is more than Rs.1,50,000 then deceased nominee or legal heir a prove of the identity will be required to claim the amount.

As already discussed, tax bracket for PPF is EEE (i.e. Exempt, Exempt, Exempt). Contribution in PPF is exempted under 80C, Interest earned is tax exempted and withdrawal is also tax exempted.

Why to miss this chance of saving the taxes when one can easily avail !!

You can also check our Income Tax Return Filing Services .