PPF Account Benefits - 2023

Friends we will discuss about PPF or Public Provident Fund in this video a fund where any amount you invest

is 101% safe, because the amount you are saving is being deposited directly to the Indian Government.

Meaning a fund where the returns are good, and the money is 101% safe

So let's start understanding the features of the PPF account one by one We will discuss the PPF calculator at the end as well.

We'll see different cases like what happens when you deposit Rs. 500 or Rs. 1000

and calculate using the PPF calculator and there is only one point of this PPF account at the end

only one point that tells us why we shouldn't deposit money in the PPF account

Meaning there is only one disadvantage. Otherwise, there are only advantages to the PPF account So let's start understanding its features one by one

First, what is a PPF account? It is an account where you deposit money for 15 years

Now, the question is, is it necessary to deposit money for 15 years? Yes, it is. There is a lock-in period of 15 years

You have deposited for 2 years and then close it, this will not happen

If you opened a PPF account today in 2023

then for the next 15 years, this account will be active, you can't close it before that

You can break it in the meantime, I'll tell you the conditions for it. But for now, let's just go with the fact that this account will last for 15 years

On the other hand, we can open FDs for 1, 2, 3, 4, 5, or for a maximum of 10 years

Similarly, we can open a PPF account for 15 years But the question is, even FDs offer good interest rates these days

then why can't we just open FD? We can open FDs as per our wishes, for 1 year, or 5 years

if you want, you can open an FD in any bank for a maximum of 10 years But you have to open PPF for 15 years

So FD comes short compared to PPF because

you don't get a tax rebate on the amount invested in FD

and the interest earned on it which is your income, is also taxable

I'll explain first why I'm saying this Suppose you opened a fixed deposit of Rs. 1 Lakh

Now did you get a tax rebate on this amount? No

Now I'll explain what is tax rebate, what happens in PPF I'll explain it in depth, not just do it superficially

Maybe 80% of you already know what a tax rebate is, but for the rest 20% who don't

I'll tell them the definition of tax rebate as mentioned in section 80C It is quite basic, but we'll cover everything.

So I don't receive any tax rebate for any amount invested in FD Suppose, I opened an FD for 5 years, OK?

and suppose, I received an interest of Rs. 25,000 or Rs. 30,000 on it after 5 years

So this amount I received will be considered as my income. Suppose I earned Rs. 10 Lakh in the entire year, other than this interest amount

So I earned Rs. 10 Lakh plus this interest in one year So my income would be Rs. 10,25,000 and not just Rs. 10,00,000

Did you get my point? This Rs. 25,000 is also considered a part of my taxable income.

Also, if you earn more than Rs. 10,000 interest on an FD in a year

then government also deducts 10% TDS from you This TDS is refunded when you file ITR, but it is still deducted

On the other hand, PPF is called EEE, which stands for Exempt, Exempt, Exempt

So the money you are depositing, suppose you are depositing Rs. 1,50,000 every year in PPF

then you are getting a tax rebate on this amount the interest you are earning on the amount you are depositing every year

is also exempted, meaning no tax is charged on it either and finally, when PPF matures, the principal plus interest

meaning the deposited amount and the total interest accumulated is also tax-free. Now tell me is there a better scheme than this?

It is 100% safe since this scheme is by the Indian government Good interest earned on the deposit amount

The deposited amount is not taxable The interest accumulated is not taxable, and matured amount is also not taxable

So there is no better scheme than this Another thing is when we invest in a scheme for 15 years

like suppose I opened an FD or any other fund I can break in the future

if we face even the slightest issues, we end up breaking that fund

But a fund, where we know that we can deposit money but can't withdraw before 15 years

these funds are beneficial for those parents Suppose, if a girl child is born in somebody's house

then I'll even call this scheme better than Sukanya Samriddhi Yojana because it goes on for 21 years, which is a long time

15 years is the best. If you open a PPF for your daughter, rather than a Sukanya account, which is also good

Or if you have a son, if he's born today, then open a PPF account today

and start saving money for him It is also safe, because when your expenses start occurring

when the expenses for education, higher education, etc. for the kid start when he's 15 or 20

So you'll need this money for that time That's why I'm saying that a 15-year-long fund that you can't break

is the fund you can invest in to save money otherwise, if you open an FD for savings when it matures, you may want to spend it

You can save yourself from these expenses, because if you can't break the fund, you can't spend it

Now let's understand more about PPF accounts Now the interest rate on the PPF account is 7.1%

Now, in today's date, you get the same interest rates in FD as well some banks even offer a 7.5% interest rate

but FD interest rates depend on the Repo rate It can go down at any point in the future

but 7.1% is a respectable interest rate You also have to consider the fact that you are getting the benefit of EEE here as well.

Now in this 15-year-long PPF account you have to make a deposit every month...sorry, every year

of minimum Rs. 500, failing to do which

the account will become inactive and you can deposit a maximum of Rs. 1.5 Lakh in this PPF account per year

Now a question arises here, as I said, there is a tax rebate available. What is that?

So let's understand tax rebates first. See, there is one section 80C It is contained in Income Tax Act, 1961

There is one section in it, section 80C This Section 80C has many products, like PF

and PPF, which we're discussing right now, then National Savings Certificate

post-office FD of 5 years, then SCSS Senior Citizen Savings Scheme, Sukanya Samriddhi Yojana etc. are there

The government says that if you purchase any of these products and invest in them

then up to Rs. 1.5 Lakh of tax rebate will be given of the amount invested

Now I'll explain this using the PPF account as an example Suppose you opened a PPF account, and suppose you earn Rs. 10 Lakh every year

Then the government will deduct the tax applicable from the Rs. 10 Lakh you earned

Whatever percentage it may be, the government will deduct it Now let's say that you deposit Rs. 1.5 Lakh out of Rs. 10 Lakh into PPF account every year

Now since this PPF account is a part of section 80C so the government says that they will give you a tax rebate for a maximum of Rs. 1.5 Lakh

So this means that only Rs. 8.5 Lakh will be considered your earning

So previously the percentage of tax applicable on Rs. 10 Lakh now your earnings won't be considered as Rs. 10 Lakh but Rs. 8.5 Lakh

because you have received a tax rebate of Rs. 1.5 Lakh by investing under section 80C

Now another question is if you deposit Rs. 1.5 Lakh in PPF and Rs. 1.5 Lakh in Sukanya Samriddhi account, then do you get a tax rebate of Rs. 3 Lakh?

The answer is no You can get a tax rebate of maximum Rs. 1.5 Lakh under section 80C

You can deposit Rs. 75,000 in PPF and Rs. 75,000 in Sukanya

total rebate is Rs. 1.5 Lakh total You can open both PPF and Sukanya accounts and deposit Rs 1.5 Lakh in each

there is no issue, but you will get a maximum tax rebate of Rs. 1.5 Lakh under section 80C, OK?

So this thing is clear Now let's move forward Now the question was, we were here

the PPF fund is for 15 years We have to deposit Rs. 500 every year

and every year, we can deposit a maximum of Rs. 1.5 Lakh in the PPF account but one big question then arises since this fund runs for such a long tenure, 15 years

in case, because of some random reason, we need funds in the meantime

then in that case, can we break this fund? So it says here that, see, the fund is for 15 years

so it says that don't even think about it before 3 years have passed

whatever problems you may face, you cannot touch this fund before 3 years

But from 3 years to 6 years in the tenure between 3 years and 6 years

if you need money in this tenure then you can take out a loan against the fund How much loan can you take?

Suppose you need funds after 4 years and in the 4 years, your investment amounted to Rs. 6 Lakh

So suppose a total of Rs. 6 Lakh has accumulated including interest

Then you can take 25% of this Rs. 6 Lakh as a loan, OK?

Apart from that, suppose you opened a PPF account and it's been 5 years since

After 5 years... See, the first thing is that you can take a loan between 3 years to 6 years

The second scenario says that when 5 years are completed you can make a premature withdrawal for any reason whatsoever

How much can you withdraw? You can prematurely withdraw 50% of the amount accumulated to date

So suppose, someone has a PPF account for 5 years and he has an investment of Rs. 7 Lakh

Then 50% of Rs. 7 Lakh i.e., Rs 3.5 Lakh can be withdrawn There is a third case as well, which says that if

someone has a financial emergency and 5 years out of 15 have already passed

and he wants to withdraw the entire amount and close the account

the capital and the interest accumulated, he wants to withdraw it all Then he can do it, he's not just withdrawing prematurely

you only get 50% in withdrawal but in premature closure the reason can only be that someone in your family needs urgent medical treatment

or someone needs to go abroad for higher education

then only in these cases, after 5 years, you can close this account

and take back your money but your reasons must be that your family member has a medical emergency

or you need to send your child abroad for higher education, only then can you close it

Moving forward, a question comes up that it is clear now that this fund is for 15 years

and we can invest a maximum of Rs. 1.5 Lakh in it every year Now some people think that this is an amazing fund and they can invest Rs. 1.5 Lakh in it

So some people wonder if they can open 2 PPF accounts Suppose, I opened a PPF account in ICICI Bank

and one in the post office. Is it possible to open 2 PPF accounts? Answer is no

You can open only 1 PPF account Your PPF account will be linked to your PAN card

You can only open 1 PPF account and deposit maximum Rs. 1.5 Lakh in it every year

Another question people ask is, let's talk about private banks

A lot of people ask if it is safe to open a PPF account in a private bank because people think that if they open a PPF account, it will either be in SBI or post-office

or in any other public bank because people think that these banks are safe

and people think that private banks like ICICI, Axis, HDFC, etc.

that these banks can crash at any point in time, I don't know why So why open a PPF account in a private bank?

Look, be it public or private, the bank acts as a third party It's a government account. If you open it in ICICI Bank even

the bank will only act as a third party your account is getting opened directly to the Indian government

So open it anywhere you want, it doesn't matter, the responsibility lies with the Indian government

After this, suppose you say that the fund was for 15 years

and it was important to deposit Rs. 500 every year But suppose, you forgot to make a deposit for a few years. What happens then?

Then your account will become inactive in that case But you can activate it again

Like, suppose you ran this account and deposited money in it for 2 years Like, 5 or 6 thousand every year

suppose Rs. 10,000 in the first year and Rs. 20,000 in the second year But you didn't deposit any money in the third, fourth, and fifth years

Then it says that every year you don't make a deposit, you are fined Rs. 50 for each year

Hence, the penalty will be ₹50 for each third, fourth, and fifth year a total ₹150 will be charged to you

And since a minimum of Rs. 500 had to be deposited every year so that has to be deposited for each missed year, so ₹1500 total

So you have to deposit a total ₹1650, out of which ₹150 is the penalty

and ₹1500 is your PPF investment So you can activate even inactive accounts

See, this is the advantage of government schemes In government schemes, the penalty is not forced on you

Take any private funds, if you forget to deposit in it for even one month

then they will charge so many penalties on you that you will get frustrated why you took it

and here you see there is a penalty of only Rs. 150 even after 3 years of no deposits So these are the benefits of government institutions and schemes

So these should be in the country because if we just rely on private funds and investment schemes from private banks

then the middle-class people and the rich will be pared but the lower-class people won't even be able to think about investments

So this is a boon for the lower-class people of the country in a way because people make mistakes when you have...

suppose there is a person who hails from a village If he opens an account, there is not enough financial literacy in rural areas so that he can keep track

So he might make mistakes So it shouldn't be that he is penalised so much that his entire investment is depleted

So it's a good thing that there are some government schemes where your money is getting deposited

and by any chance if it becomes inactive, it can be activated again because I've seen many such policies, where you don't pay for a year or two by mistake

and so much penalty is charged that the entire investment to date is depleted So compared to those, it is quite good, OK?

So in it, every month... Another thing is that you can't open a joint account here Suppose, in the case of an FD, husband, and wife open one under joint names

So husband and wife can open an FD under both their names but you can't open a PPF account under joint names

It has to be opened at an individual level Let's see some additional questions related to PPF accounts now

First, we have already discussed that we can invest a maximum of Rs. 1.5 Lakh in PPF every year

Now, if you want, you can deposit it on the 1st of April See, first thing, the PPF account doesn't follow the 1st January to 31st December calendar

it follows the financial year Financial year means from 1st April to 31st March

This is the cycle. Now please understand this part it is said often that the money you're putting in a PPF account

it's not like everyone will deposit Rs. 1.5 lakh on 1st April itself

because you can't deposit more than Rs. 1.5 Lakh Now not everyone does that. They deposit some money every month

like deposit Rs. 5000 this month and Rs. 10,000 the next month

So here you have to keep in mind that whenever you invest, suppose it is April

and you deposit Rs. 10,000 in PPF in April or May

Then as the month starts, suppose April has started then you should deposit money in PPF before the 5th of April

because only the amount deposited in PPF before 5th is considered for interest payment for the month

Let's understand this with an example Suppose April has started and on the 1st of April

the total balance in your PPF account is Rs. 1 Lakh, OK? and on 6th April, you deposited ₹50,000 more in the PPF account

Then the interest earned in the month of April will be calculated on Rs. 1 Lakh only

Now when May starts after April and when the 5th of May arrives, then your ₹50,000 will be counted

But then when we consider a second case the balance in your account on 1st April was Rs. 1 Lakh, OK?

and suppose you deposited ₹50,000 on the 4th of April, rather than 6th

then they see the balance on 5th and in this case, the interest will be calculated on the entire Rs. 1.5 Lakh

Do you understand? So you make the deposit in any month but try to do it before the 5th of that month

See, here on their official website in their brochure, it is clearly mentioned

The best time for a deposit in a PPF account is between the 1st and 5th of the month So invest between the 1st and 5th of the month

Now a question is raised, that this fund is for 15 years Suppose, this year, in 2023, I opened the PPF account

Now suppose I deposited money in April this year in May, June, July, and August, I kept on depositing

So how am I getting the interest? Like in FD, when it matures we receive the interest, right?

So after 15 years from the year 2023 when the PPF matures, will I learn about the amount of interest then only?

It's not like that. See suppose you invested in PPF from April to August of 2023

then didn't make investments in September and October, then the new year started

Now all the money you deposited in 2023 you will receive interest on it, and just like savings account statements

you will receive a similar statement for PPF account where you can see the deposits you made

The interest earned on it will be credited the next year 2024 On 31st March 2024, one entry will appear in your account at night

that the total interest earned in the previous year has been credited, understand? The interest earned on the total deposits in a year on 31st March

will be credited to your account and shown as an entry, OK? Now, there are some other options for PPF as well, as we discussed already

that this is a 15-year-long scheme, OK? Now when 15 years are completed, you are given 3 options

The first option is, the total principal you have deposited plus the total interest earned

you can withdraw the entire amount and close the account The second option is, 15 years are completed, and you say

that you want to extend it So you can extend it in 5-year installments for as many times as you want

Meaning, as 15 years are completed, you say that you want to extend it for 5 more years and you will keep on investing money every year

and the principal and interest you have earned till now

you will be adding more investments to it in future and so you extend the time period for 5 more years

You may want to extend it further for 5 years, so you can extend it in 5-year installments And third case is, suppose 15 years are completed

the principal and interest you earned, you can keep it there and extend it for 5 more years

But in these 5 years, you will not invest in it anymore the total amount accumulated will keep on earning interest in the meantime

So you get these 3 options after maturity Now, in the case of PPF accounts, you just have to keep in mind one thing

that as I mentioned before, the cycle of the PPF account runs from 1st April to 31st March of next year

Now the year of opening of the PPF account is considered the zero year

like suppose, let's go with the example of the year 2023

You opened a PPF account on 31st March 2023

As soon as 1st April arrives, the zero year ends

and your first year starts on 1st April 2024 and on 31st March 2024, your first year will end

But you made a mistake You opened this account on 2nd April 2023

So the entire next year, from 2nd April till 1st April 2024

would be considered your zero year So in this scenario, the maturity of your PPF would be considered

15 years plus 1 year here so 16 years later

So the day you open the account, suppose you opened it in December so from December till April will be considered your zero year

After that, from 1st April till 31st March would be considered 1st year So PPF account can be of 16 years too

if you make this mistake and open the account in the first 5 days of April

then your PPF account can have a tenure of 16 years too Now, let's look at this last question

that as I mentioned at the start, we'll discuss the calculator after this At the start of the video, I said there is only one reason for not opening a PPF account

It is because currently, the government is offering an interest rate of 7.1%

But it is not fixed. You will see the calculator too and see if you deposit a certain amount, you will receive a specific amount of interest

and you will start dreaming about it that way If I open a PPF account today, I'll start daydreaming about the amount I'll receive 15 years later

But what is the guarantee that the interest rate will remain at 7.1% next year

or after 5 years from now It's not fixed. Suppose you can open a PPF account today at a 7.1% interest rate

and after 5 years, suppose the government lowers the interest rate to 4%

So the amount you deposited to date is good

but the investments you make on top of that amount will only generate interest of 4% from that year onwards

There is no rule that if you open PPF at 7.1% today you will get 7.1% interest for the next 15 years, it is not guaranteed

Over the period of time, the government has only lowered its interest rates, see

if someone opened a PPF account in the year 2014-15

thinking that they will get an 8.7% interest rate they may have calculated everything at that time too

that if they deposit Rs. 1.5 Lakh every year they will receive a certain amount after 15 years, and some more if they extend it for 5 years

they may get their daughter married in a lavish fashion with that money or someone may have planned to send their kids abroad for higher education

or whatever else may their plans and dreams be He had planned these things considering the interest rate to be 8.7%

But gradually, the government has lowered the interest rate to 7.1%

If his PPF account is still active, which is possible since 15 years are not up yet

if he opened the account in 2014, then it will mature in 2029

He knew that the interest rate was 8.7%, so he deposited some money too

But it is 2023 now, and he's getting 7.1% interest now

It is a disadvantage of this scheme Over the period of time, the government has lowered the interest rates, I've been observing

that they haven't reduced it in some time, it is stable at 7.1% now for the last 2-3 years, it was 7.9% in 2019, and 7.1% since 2021-22

it was lowered to 7.1% in 2021-22 and it has been stable for the last 2-3 years but there is no guarantee and the government can lower it further

It is a 15-year scheme, suppose, hypothetically, the government gradually lowers it to 4%

then we'll regret investing in the first place So this is the only reason that I feel puts this account at a disadvantage

Now let's see its calculator, and see how the calculations work Suppose you deposit Rs. 500 every year, OK?

So you run it for 15 years at a 7.1% interest rate, then you deposit a total ₹7500

the interest will be Rs. 6061, and total maturity amount will be Rs 13,000 So this was just a joke, you will obviously deposit more than Rs. 500

Let's take an example, suppose you deposit Rs. 5000 every month, so Rs. 60,000 in a year

So let's put it in the calculator, you invested Rs. 60,000 in a year

It's a 15-year-long scheme, with a 7.1% interest rate You invested a total ₹9 Lakh, OK?

The total interest earned is ₹7,27,000 and after 15 years, the total amount to be received is ₹16,27,000. Right?

But suppose you want to invest the maximum permissible amount of Rs. 1.5 Lakh a year

then you will have to deposit Rs. 12,500 every month. Suppose you do that

and you continue doing it for 15 years, with a 7.1% interest rate So you invested a total ₹22,50,000

you earned a total interest of Rs. 18,18,000 and your total amount becomes Rs. 40,68,000

So if you deposit Rs. 12,500 regularly every month

then you will receive Rs. 40,68,000 at maturity but suppose you extend it further for 5 years after maturity

So in this case, your maturity amount becomes Rs. 66,58,000 So you can gradually extend it

and suppose you extended it for 35 years more, so in that case if you invested Rs. 12,500 every month

See, there is a scheme called Atal Pension Yojana where you invest for 40 years

So suppose you think that you are already investing for 15 years so you can invest for 35 years more, and then you continue depositing Rs. 12,500 every month

then in this case, on maturity, you will receive ₹6,75,00,000 from the PPF account

which will be tax-free The money you deposited, the interest you earned, and the returns on maturity will be tax-free

So you can earn up to Rs. 6,75,00,000 from this PPF account Friends, I hope that I have discussed everything related to PPF accounts with you.

its positive as well as negative points I tried my best to do it, now I have a request to make

We have a new channel where you will find all videos related to maps under the name of Ankit Madaan Official

I'll request you to show that channel the same love you have shown here I tried my best to cover each and every point in this video

For now, this is the end of the video. Thanks for listening, and thank you all.