This article discusses ways to increase PPF contributions, including making frequent contributions, extending the account, and opening accounts for family members.
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Public Provident Fund (PPF) is one of the most popular investment options among Indians due to its tax-free returns and long-term savings benefits. However, many wonder if they can increase their PPF contribution to maximise their savings potential. This article will discuss whether you can increase PPF contribution and how you can do it.
What is PPF?
PPF is a long-term savings scheme introduced by the Indian government in 1968. It is a tax-free investment option that offers a fixed interest rate and has a lock-in period of 15 years. The interest rate on PPF is reviewed and revised every quarter, and it currently stands at 7.1% p.a. (as of October 2021).
Can We Increase PPF Contribution?
Yes, it is possible to increase your PPF contribution. The current maximum limit for PPF contribution is ₹1.5 lakh per financial year. However, if you have not already reached this limit, you can increase your contribution up to this limit. Here are some ways to increase your PPF contribution:
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Increase the Amount You Contribute Each Year
The simplest way to increase your PPF contribution is to contribute more money each year. You can contribute additional contributions to your PPF account if you have spare cash. However, remember that you cannot exceed the annual limit of ₹1.5 lakhs.
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Make Contributions More Frequently
Instead of making a lump sum payment at the beginning of the financial year, you can make smaller, more frequent contributions. This not only ensures that you do not miss out on the opportunity to invest but also helps you average the investment over the year, reducing the impact of market volatility.
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Extend the Duration of Your PPF Account
PPF has a lock-in period of 15 years. However, you can extend your PPF account in blocks of 5 years after the initial 15-year period. This means you can continue contributing to your PPF account and earn tax-free returns for an additional 5 years. This can help you to maximise your savings potential and earn higher returns over the long term.
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Open a PPF Account For Your Spouse and Children
If you have not already reached the maximum limit of ₹1.5 lakh, you can open a PPF account for your spouse and children and contribute on their behalf. This can help you to maximise your savings potential and earn higher returns over the long term.
Benefits of Increasing PPF Contribution
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Tax Benefits
PPF offers tax benefits under Section 80C of the Income Tax Act. Contributions made to PPF are eligible for tax deduction up to ₹1.5 lakh per financial year. Additionally, the interest earned on PPF is tax-free.
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Long-Term Savings
PPF has a lock-in period of 15 years, which means that it is a great long-term savings option. Increasing your PPF contribution can build a substantial corpus for your future financial goals.
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Guaranteed Returns
PPF offers a fixed interest rate, which is currently 7.1% p.a. This means that you can earn a guaranteed return on your investment, irrespective of market fluctuations.
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Flexibility
PPF allows you to make contributions as and when you have spare cash. Additionally, you can extend your PPF account in blocks 5 years after the initial 15-year period. This allows you to customise your investment strategy to suit your financial goals.
Conclusion
PPF is an excellent investment option for long-term savings. Increasing your PPF contribution can maximise your savings potential and earn higher returns over the long term. However, before increasing your PPF contribution, it is essential to consider your financial goals and investment strategy.
PPF is just one of many investment options available, and it is essential to diversify your investment portfolio for better risk management and maximising returns.
The Vakilsearch PPF calculator is a simple tool that allows you to calculate the maturity amount of your PPF account based on your investment amount and the duration of the investment. You simply need to input your investment amount, the number of years you plan to invest, and the current interest rate for PPF accounts. The calculator will then provide you with an estimated maturity amount for your PPF account.
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