PPF Tax Benefits and Features Last Updated : 17 Sep 2019

Under Section 80C of the Income Tax Act, 1961 the holders of PPF accounts can get tax benefits. Maximum deposit allowed per year is 1.5 years and the offered tax benefit is for the entire amount. There are tax-free returns and no wealth tax as well.
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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 2014-15.

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 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
Table 1. Tax Saving Chart for PPF
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.

FAQs

  1. Is it possible for individuals to hold more than 1 Public Provident Fund (PPF) account?
  2. No, individuals can have only one PPF account under their name. However, they can open another account on behalf of a minor.

  3. What is the list of documents that are needed when opening a PPF account?
  4. The list of documents that are needed to open a PPF account is mentioned below:

    • Nomination form
    • Copy of PAN card or Form 60-61
    • Form A or PPF account opening form
    • Photograph (passport size)
    • Residence and ID proof as per Know Your Customer (KYC) standards.
  5. Is it possible for individuals to transfer their PPF account to another person?
  6. 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.

  7. Can women change the name on the PPF account after marriage?
  8. Yes, women would be able to change the name on the PPF account after marriage. However, necessary documents must be submitted.

  9. Is the PPF amount that is received on maturity tax-free?
  10. 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.

  11. What is the maximum amount an individual can invest towards PPF in a year?
  12. The maximum amount an individual can invest in a year towards PPF is Rs.1.5 lakh.

  13. How many contributions can be made towards the PPF account in a month?
  14. 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.

  15. Is it possible for Non-Resident Indians (NRIs) to open a PPF account?
  16. No, NRIs are not allowed to open a PPF account.

  17. Is it possible for minors to open a PPF account online?
  18. No, minors are not allowed to open a PPF account online.

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