Which Scheme gives you the highest tax benefit in 80(C)?

PPF (PUBLIC PROVIDENT FUND)

The Public Provident Fund is a savings-cum-tax-saving instrument in India, The main goal of the scheme is to attract small savings by offering an investment with reasonable returns mixed with income tax benefits.
The scheme is guaranteed by the Central Government.

PPF TAX CONCESSIONS

Annual contributions qualify for tax deduction under Section 80C of income tax. The tax benefit is capped at ₹1.5 lacs per financial year. Contributions to PPF accounts of the spouse and children are also eligible for a tax deduction.

PPF falls under the EEE (Exempt, Exempt, Exempt) tax basket. Contribution to the PPF account is eligible for tax benefit under Section 80C of the Income Tax Act. Interest earned is exempt from income tax and maturity proceeds are also exempt from tax.

Eligibility

Indians are eligible to open their account under the Public Provident Fund.

Duration of SCHEME

The original duration is 15 years. Thereafter, on application by the PERSON, it can be extended for 1 or a maximum of 5 years each.

INTEREST RATE

A minimum yearly deposit of Rupees 500 is required to open and maintain a PPF account. A PPF account holder can deposit a maximum of ₹1.5 lacs in his/her PPF account (including those accounts where he is the guardian) per financial year. There must be a guardian for PPF accounts opened in the name of minor children. Parents can act as guardians in such PPF accounts of minor children. Any amount deposited above  ₹1.5 lacs in a financial year won't earn any interest. The amount can be deposited in a lump sum.

The interest rate is compounded annually and paid on 31 March every year. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.

PPF MATURITY OPTIONS

Subscriber has 3 options once the maturity period is over.

One Time Withdraw

Extend the PPF account with no contribution – PPF account can be extended after the completion of 15 years, PPF account holder doesn't need to put any amount after the maturity. This is the default option meaning if PPF Holder doesn't take any action within one year of his PPF account maturity this option activates automatically. Any amount can be withdrawn from the PPF account if the option of extension with no contribution is chosen. The only restriction is only one withdrawal is permitted in a financial year. The rest of the amount keeps earning interest.

Second Type Of Maturity

extend the PPF account with contribution - With this option PPF holder can put money in his PPF account after extension. If a subscriber wants to choose this option then he needs to submit Form H in the bank where he is having a PPF account within one year from the date of maturity (before the completion of 16 yrs in PPF). With this option, the subscriber can only withdraw a maximum of 60% of his PPF amount (amount which was there in the PPF account at the beginning of the extended period) within the entire 5 yrs block.

 Every year only a single withdrawal is permitted.

WITHDRAWALS OF PPF ACCOUNTS

There is a fixed period of 15 years and the money can be withdrawn in full after its maturity period. However, pre-mature withdrawals can be made from the start of the seventh financial year. The maximum amount that can be withdrawn pre-maturely is equal to 50% of the amount that stood in the account at the end of the 4th year preceding year or the end of the immediately preceding year whichever is lower.

Nomination

A nomination facility is available in the name of one or more persons. The shares of nominees may also be defined by the PPF account Holder.

In case of death of the account holder then the balance amount will be paid to his nominee or legal heir even before 15 years. Nominees or legal heirs are not eligible to continue the account of the deceased.

 If the balance amount in the account of a deceased is higher than ₹150,000 then the nominee or legal heir has to prove the identity to claim the amount.

PPF defaults and how to resolve it

If any contribution of the minimum amount in any year is not invested, then the account will be deactivated. To activate the bearer needs to pay ₹50 as a penalty for each inactive year. He/she also needs to deposit ₹500 each as each inactive year's contribution.

Transfer of PPF account

The account can be transferred to other branches/ other banks or Post Offices and vice versa upon request by the subscriber. The service is free of charge.

Step 1 – Approach the bank or post office branch where the PPF account is held and ask for the form for making the transfer. The bank or post office will provide you with a form that is to be filled.

Step 2 – The existing bank will then forward the certified copy of the account, the account opening the application, nomination form, and specimen signature. It will also forward the cheque/dd for the outstanding amount in the PPF account to the new bank at the branch specified by the customer.

Step 3 – Once your bank receives these documents, the bank will inform you and ask you to submit a new PPF account opening form along with the old PPF passbook. You can also provide nominations for this new account. You will also be required to submit the KYC documents.

Step 4 – If you hold an internet banking facility with your bank, after a few weeks, check that the transferred PPF account now shows up under the PPF account tab/link in your login. If that is not the case, inquire about the local bank branch.

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