PPF- Best instrument
to create corpus , without paying TAX
Authored by:
Ajit Panicker
PPF account is the best investment option where you can put good amount every year and build a huge corpus without paying taxes. With a little planning, it can be an important part of your financial portfolio. Here are a few tips that will help you make the most of this option:
Maximise limit:
The 8.8% compounding interest you will be earning from now on, the latest news today declared , on the balance can work wonders for you, especially because a PPF account is a long-term investment. There is an annual limit of Rs 1,00,000 that one can invest in the PPF. You may feel it is a waste to be investing Rs 1,00,000 in this option when your Rs 1 lakh tax saving limit under Section 80C has already got exhausted. But don't let the tax savings alone guide your decision. Invest as much in PPF as you can afford to. If you contribute Rs 1,00,000 a year to your PPF for 15 years, your investment would grow to a gargantuan Rs 35.43 lakh on maturity.
And remember, this is tax-free money. In the 30% tax bracket, this is equivalent to receiving almost 12.8% interest on a bank fixed deposit. “The PPF offers the highest post-tax returns among all fixed income options since no tax is levied on the investment, income and withdrawals,”
Distribute income:
There are benefits in store if you open a PPF account in the name of your spouse or child. Tax laws say that if any money gifted to a spouse is invested, the income from that investment is clubbed with the income of the giver. But since PPF income is tax free, it will not push up his tax liability. This way, you can invest more than Rs 1,00,000 a year in this tax-free haven and benefit from its various advantages.
This strategy does not work in case of minor children though. You can open a PPF account in the name of a minor child but the combined contribution to your and your child's account cannot exceed Rs 1,00,000 a year.
Invest for children:
However, if the child is over 18 years, up to Rs 1,00,000 a year can be invested in his name separately. The taxman insists on clubbing the income of minor children with that of the parent. But once they turn 18, they can have a separate income. “A PPF is an ideal way of building a fund for your child's educational needs instead of falling for all the ‘high-commission-paying’ child plans of insurers,”
“In a child plan, you are not sure of the final returns.
PPF account is the best investment option where you can put good amount every year and build a huge corpus without paying taxes. With a little planning, it can be an important part of your financial portfolio. Here are a few tips that will help you make the most of this option:
Maximise limit:
The 8.8% compounding interest you will be earning from now on, the latest news today declared , on the balance can work wonders for you, especially because a PPF account is a long-term investment. There is an annual limit of Rs 1,00,000 that one can invest in the PPF. You may feel it is a waste to be investing Rs 1,00,000 in this option when your Rs 1 lakh tax saving limit under Section 80C has already got exhausted. But don't let the tax savings alone guide your decision. Invest as much in PPF as you can afford to. If you contribute Rs 1,00,000 a year to your PPF for 15 years, your investment would grow to a gargantuan Rs 35.43 lakh on maturity.
And remember, this is tax-free money. In the 30% tax bracket, this is equivalent to receiving almost 12.8% interest on a bank fixed deposit. “The PPF offers the highest post-tax returns among all fixed income options since no tax is levied on the investment, income and withdrawals,”
Distribute income:
There are benefits in store if you open a PPF account in the name of your spouse or child. Tax laws say that if any money gifted to a spouse is invested, the income from that investment is clubbed with the income of the giver. But since PPF income is tax free, it will not push up his tax liability. This way, you can invest more than Rs 1,00,000 a year in this tax-free haven and benefit from its various advantages.
This strategy does not work in case of minor children though. You can open a PPF account in the name of a minor child but the combined contribution to your and your child's account cannot exceed Rs 1,00,000 a year.
Invest for children:
However, if the child is over 18 years, up to Rs 1,00,000 a year can be invested in his name separately. The taxman insists on clubbing the income of minor children with that of the parent. But once they turn 18, they can have a separate income. “A PPF is an ideal way of building a fund for your child's educational needs instead of falling for all the ‘high-commission-paying’ child plans of insurers,”
“In a child plan, you are not sure of the final returns.
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