How to Make Most of New PPF Limit of Rs 1.5 lakh

The Public Provident Fund (PPF) is one of the most popular tax-saving schemes. In a further boost to its attractiveness, Finance Minister Arun Jaitley in the Budget increased the ceiling on PPF investment to Rs 1.5 lakh from Rs 1 lakh. The government has issued a notification raising the annual PPF deposit limit to Rs 1.5 lakh.. Mr Jaitley also increased the maximum amount eligible for deduction through permissible investments under 80C of the Income-Tax Act to Rs 1.5 lakh, from Rs 1 lakh. PPF is one of the financial savings that qualifies for Section 80C tax benefits. Not only the money you invest in PPF is exempt from tax under Section 80C, the interest you earn on the PPF investment is also exempt from tax.. (Also Read | New PF Rules: What to Know) How PPF interest is calculated: The interest on PPF account is no longer fixed and is now pegged to the yield on government bonds. The government declares the interest rate payable on PPF every year. For 2014-15, the government has announced interest rate of 8.70 per cent (compounded yearly).. The interest on balance in your PPF account is compounded annually and is credited at the end of the year. But the point to remember is that the interest calculation is done every month: the interest is calculated on lowest balances in account between 5th and the last day of the month.. So if you deposit after 5th of a month, you don't earn interest for that month.. The ideal way to maximise the interest on your PPF account would be to invest Rs 1.5 lakh (the maximum investible amount in a year) at one go at the beginning of the financial year. PPF accounts follow an April-to-March year so to earn the maximum interest, you should deposit the amount on/before 5th of April every year. A one-time deposit will earn interest for the whole year.. Deposits in PPF account can be made in lump-sum or in maximum 12 installments.. On the other hand, if you want to deposit some amount every month, remember to deposit on/before 5th of that month. This will help you to earn interest for that month.. Suppose, you deposit Rs 15,000 every month in 10 instalments. A back-of-the-envelope calculation suggests that if you deposit before 5th of every month, you can earn extra monthly interest of close to Rs 105 and for 10 months it would help you to earn Rs 1,050 more, at the current interest rate of 8.7 per cent. For a long-term investment product like PPF, if you follow the habit of depositing before 5th of every month, it could mean bigger retirement kitty for you.. Disclaimer: "Investors are advised to make their own assessment before acting on the information."

How to Make Most of New PPF Limit of Rs 1.5 lakh

NDTV Profit

NDTV Profit

Follow Us

DOWNLOAD THE APP