Not only extra savings and interest amounts, but an investor also receives tax benefits with the multiple perks of the Public Provident Fund or PPF. A small savings scheme that offers high returns on maturity with low to no risk at all. Backed by the Government itself, this savings plan can opt for retirement, for child’s marriage or any other major event that can drain you financially. So, the point we are here to discuss, mainly, is the capped tax deduction limit of PPF when an investor makes a contribution of more than ₹1,50,000 lakhs in a financial year.
PPF Contributions Get Tax Benefits Till 1.5 Lakh
In a PPF saving scheme, contributions made towards the account are tax deductible under Section 80C of the Income Tax Act, along with LIC premia, PF contributions, etc. Moreover, interest garnered in the PPF account on the accumulated balance is also tax exempted. And if we talk about withdrawals, there is no tax payable on them. So, PPF is an Exempt Exempt Exempt savings plan.
“PPF was earlier governed by the Public Provident Fund Scheme 1968 which provided for a maximum cap of Rs 1,50,000 per individual as investment limit in a financial year. The limit was raised from the previous cap of Rs 1,00,000 in August 2014. The PPF Scheme, 1968 was rescinded by the Central Government in December 2019 and the new scheme – The Public Provident Fund Scheme 2019 — was notified by virtue of powers conferred under the PPF scheme and is now governed by the Government Savings Promotion Act 1873. However, the maximum cap has been retained at Rs 150,000,” financial express quoted Saraswathi Kasturirangan from Deloitte, India.
So, in simple terms, a person cannot make contributions valued at more than ₹1.5 lahks in a financial year. But there are no restrictions or strict rulings on the type of and the number of contributions you are making. You can contribute the payment in multiples of ₹50 also.
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“PPF provides assured returns in the form of interest to tax-exempt investors. The rate of return is notified by the Department of Economic Affairs of the Ministry of Finance. The current rate is at 7.1%, and while the returns have been lower over the past decade from 8.8% in 2012-13, the fact that this is tax-exempt means that the effective rate of return is higher. On a separate note, the fact that there is an assured tax-free return could be one of the factors influencing the annual investment limit,” mentioned financial express.
