When I started my business my Chartered Accountant told me that to save taxes you have to invest money in Public Provident Fund
Here is the exact definition of PPF as per Wikipedia
The Public Provident Fund (PPF) is a savings-cum-tax-saving instrument in India introduced by the National Savings Institute of the Ministry of Finance in 1968. The main objective of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Central Government, Balance in the PPF account is not subject to attachment under any order or decree of court under the Government Savings Banks Act, 1873. However, Income Tax & other Government authorities can attach the account for recovering tax dues.
The Scheme offered a good return of 12% when it started in 1968, which is at par with Bank Fixed Deposit but now it is only 7.1%. The biggest drawback is that your money is fixed for a period of 15 years, and as a result cannot close the account before 15 years, you can withdraw 50% money for personal use, which has to be repaid before the next loan is sanctioned, and inactive accounts lead to penalties, so every year you have to deposit some money in the account.
Annual contributions qualify for tax deduction under Section 80C of income tax as per the old Tax regime. The tax benefit is capped at ₹1.5 lakhs per financial year. This means they get tax deductions under Section 80C when they invest, and the accrual of interest as well as withdrawal is completely tax-free.
Yes, I and thousands like me have invested in the PPF scheme to save on taxes and it was the right decision in the olden days but after new schemes have come this is not very attractive as the returns are only 7.1% and once the 15 years are over putting money again is not the right option.
Your Father and Mother must have invested in PPF and even your account must be lying unutilized in some bank or post office as you never bothered about it till today, close that account and transfer the funds to a better investment option now and today.
