Annual deposit in PPF raised to Rs.100000 – Save more and Secure !

The finance ministry has notified rules which will provide small savings account holders to earn higher returns and accordingly it had raised the limit of annual deposit in Public Provident Fund (PPF) from Rs.70000 to Rs.100000 and the interest rate in PPF savings to 8.6%.

This idea of increasing the limit was to serve two purposes: It would increase the thrust of saving among people which would increase their investment in deposits and at the same time because of the locking feature, government could invest this deposits which would fetch them effective return. It has brought relief to taxpayers especially for them falling in the top tax bracket. As a result, taxpayers can avail the maximum deduction under Sec 80C by investing the entire Rs.100000 in PPF.

Since most of the investors are risk averse and they want risk – free return on their investment, they avoid spending in risky asset. So investment in PPF has always been the most popular tax saving tools because of its zero rated risk and the “three – way” exemptions associated with it: the “principal amount” invested is eligible for deduction under Sec 80C to the extent of Rs.100000, “interest” accruing thereon @ 8% is exempted u/s 10(11) and the “total amount” withdrawn is also fully exempt from tax. In other words, you earn more than what you invest, that too completely tax free.

Every taxpayer either falling in the lowest tax bracket or in the highest tax bracket, that is, 30.9% tries to save their maximum income by subscribing to PPF. They are always found unsatisfied with the ceiling limit of only Rs.70000 because for availing the full benefit of deduction of Rs.1,00,000 under Section 80C, an assessee had to look at other avenues of savings or investments after exhausting his choice for PPF investment of Rs.70,000.

At the same time it would be costlier to obtain loans from the savings under as lending rate has been doubled to 2 percent. The government has also done away with commission for agents on PPF.

But the increase in the ceiling limit has been a sigh of relief especially for the aggrieved taxpayers and it will thrust in the habit of investing among others.

Hence taxpayers should avail this opportunity, it will save tax and will secure their future.

Please Contact Us for any assitance on any of issues on Individual Taxations

Leave a Reply

Your email address will not be published.