Public Provident Fund (PPF) Scheme: Have anything from Rs 500 to 1.5 lakh? Save Income Tax, Earn big, Get cheap loan

Public Provident Fund (PPF): If you have any amount ranging from Rs 500 to Rs 1.5 lakh, here's a sure shot and safest way to make it grow over a period of time. All you need to do is open a Public Provident Fund (PPF) account with any of the commercial banks or the Post Office and park your money there for a period of 15 years. The PPF account can be transferred from one bank to another on account of various reasons, including job transfer, better service etc. 

PPF is is a very popular long-term investment option backed by the Government of India. It offers safety with an attractive interest rate and returns on the investment. Moreover, the returns are fully exempted from Tax. 

A person can invest a minimum Rs. 500 to maximum Rs. 1,50,000 in a financial year. The PPF account also offers customers facilities like loan, withdrawal, and extension of account.

At the current rate of 8.0% interest, you can expect a tax-free return of around Rs 46 lakh on an investment of Rs 1.5 lakh per for 15 years.

The PPF account matures in 15 years. However, partial withdrawal is allowed before maturity. One can make a partial withdrawal from 7th year onwards. The amount to be withdrawn before the completion of maturity be lower of the two: 1. Fifty per cent of the balance available at the end of 4th year immediately preceding the year of withdrawal; 2. Fifty per cent of the balance at the end of immediately preceding year of withdrawal. One can make partial withdrawals only once in a year. 

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The PPF account can be closed before the end of the maturity period. 

A loan can be taken in lieu of PPF deposits. The maximum loan amount one can get on PPF deposit is capped at 25% of the balance amount at the end of the year immediately preceding the year in which the loan is applied. Loan facility is not available from the 7th year. The interest rate charged on the loan is just 2% more than the interest earned on the balance in the PPF account. However, the rate becomes 6 per cent more than the interest earned on the balance in the PPF account, if the repayment process crosses 36%.