Any financial advisor would definitely recommend an investment in PPF (Public Provident Fund) as one of the means to build long-term wealth. You can make investments in this scheme every year (in a maximum of twelve instalments) right from Rs. 500 upto Rs. 1 lakh. You can make investments either in your name or on behalf of a minor. While the tenure of the PPF account is fixed at 15 years, you can extend it for a further block of five years too. From 2012, interest on the PPF account will be notified by the government at the beginning of every year (April 1). PPF investments are eligible for deduction under Section 80C of the Income-Tax Act. Here's the lowdown on how you can open a PPF account.
Post offices and Banks
Along with instruments such as the MIS and NSC, PPF is part of the small savings scheme run by the post office. Hence, one of the options is to maintain your PPF account in the nearest post-office. Opening the account involves filling up a simple two-page application form and the tendering of cash/cheque for the initial subscription. Your passport size photograph, PAN and address proof are the basic requirements.
In case the PAN is not available, an attested copy of the ration card, voter identity card or passport can be submitted. If you are opening an account on behalf of your minor son or daughter, a copy of his/her birth certificate may also be needed. When you open the account, you will be given a passbook. The passbook needs to be updated for every investment you make and for the interest you receive. You will also get a receipt for every deposit you make which can be shown as a proof of tax-saving investment at your office. This will help reduce the TDS outgo from your salary. Besides post-offices, most public sector banks also help you open PPF accounts with them. The account opening and documentation requirements here are largely the same.
Online investments
With almost every investment option, be it stocks, mutual funds, fixed deposits or bonds, available at the click of the mouse, can PPF investments be made online too? Well, you cannot if you have an account with the post-office.
But some banks permit online transfers. For example, if you have your PPF account with SBI and your salary/savings account with ICICI Bank, you can log into net banking and add the SBI PPF account as a payee/beneficiary for transfer from your ICICI account. Similarly, money from your Citibank savings account can be transferred to your State Bank of Mysore PPF account.
Moreover, if you have a savings account and the PPF account with the same bank, these two can be linked. In this case, you need not add the PPF account as a third-party beneficiary. You can directly transfer money. Also, you can view the credits to the PPF account online just like how you see your bank statements.
So, if you have savings/PPF account with other private/public sector banks, do a quick check with your banker. In case the bank does not allow online transfers, you can transfer your account to a bank that does. A post-office PPF account too can be transferred to a bank.
(This article was published in The Hindu BusinessLine >here )
