Tuck this sum away for that Rainy Day

Earn a better rate of interest than what the bank has been paying you, try savings in the Public Provident Fund (PPF).

Savings in the PPF have been popular for quite some time. They earn a good rate of interest. But remember they are for the long term .PPF deposits earn interest of 11 % per annum. At this rate, it is a very attractive investment option. Interest is credited to the account in the month of March every year. The interest earned is fully exempt from income tax.

Compare this with a time deposit with a bank. Many private banks do offer interest rates of 10.5 % - 11 % on deposits, placed with them, for periods ranging from 1 to 2 years. But any interest earned in excess of Rs.10, 000 per annum will be subject to a deduction of tax by the bank at the rate of 10 % from your interest amount.

In the PPF Account, the minimum amount that can be deposited in one financial year is Rs.100 and the maximum amount which can be deposited is Rs.60, 000. The amount so deposited can be made over the whole of the 12 months of the financial year in convenient installments up to a maximum of 12 in number. The financial year would mean April-March. The PPF scheme is open to both individuals and to the Hindu Undivided Family. Further, anyone can make deposits on behalf of their minor children also. Money invested in PPF, will be available to you after a period of 15 years. You can also opt to extend the period for another 5 years. However in case you need money, you can take a loan from the third financial year. Withdrawals are allowed from the 7th financial year.

One special feature which makes investment in PPF unique, is that this investment cannot be attached by court.

Tax Benefits
If you are an Income Tax Assessee then any investment in the PPF makes it eligible for deduction at the rate of 20 % under Section 88 of the Income Tax Act, 1961. So if you have invested a sum of Rs.10, 000 for the whole year, the deduction available to you would be Rs.2, 000. If you have invested say Rs.60, 000 the deduction available to you would be Rs.12, 000.

Where can one go to open a PPF?

Go to a Head Post Office, Selection Grade or notified nationalised banks, like the State Bank of India It is also possible to transfer your PPF account from one HPO to any branch of SBI or nationalised branch and vice versa.