Investment in PPF (Public Provident Fund) Account is a favorite tax saving investment option for Indian tax payers in view of the following :
But for the long maturity period of 15 years, PPF is the best available option for tax saving. This can be understood from the following example:
If a person invests say Rs. 1 lac every year for six years under the scheme. Thereafter, he withdraws Rs. 1 lac every year and also invests Rs. 1 lac every year. Therefore, his total investment under the scheme remains at Rs 6 lacs. He will have a tax saving of Rs. 30,900/- every year for 15 years (total Rs. 4,63,500/- ) if he is in upper tax bracket of 30% income Tax, Rs. 20,600/- per year for 15 years (total Rs. 3.09 lacs) if he is in tax bracket of 20% income tax. And, his investments under the scheme (Rs. 6 lacs) will grow to over Rs. 17 lacs on maturity after 15 years. These calculations are based on current PPF interest rate of 8.70% p.a. and current income tax rates.
PPF accounts can be opened at designated branches of State Bank of India and its associate banks, all Head Post Offices and other designated Post Offices and at designated branches of other nationalized banks.
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