I would say Public Provident Fund is one of the best Tax saving options that the Government provides for the citizens. The best part about PPF is that there is a deduction in income and also the interest that is earned also is tax free. Since this scheme is by the Government of India, I think it is relatively safer than any other financial investments.
The money that is invested is tax free under section 88, are eligible for 20% Tax Rebate. The maximum amount that can be invested is Rs.70,000. The returns on money invested is also pretty good. Government pays around 8% p.a. it is just a percent lesser than savings account. The best part is no tax on interest, effectively it is more than what we think that we are saving by investing in PPF. Good thing is that one can open a PPF account and invest from Rs.500 to Rs.70,000 and also the investments can be made in 12 installments in one year and the amount that is deposited need not be identical, that gives the best option. We can always invest the money whenever we have surplus. This is a great deal. The entire amount that is accumulated over in years is exempted from wealth tax.
Some negative points about PPF:
1. The investment term is very long – 15 years.
2. The interest rates varies over the period of time and you never know how much interest you might get. (Little uncertain)
3. Interest is calculated on lowest balance between 5th and last day of March.
4. Money is held and it can’t be liquidated easily.
I would strongly urge most of the individuals to have a PPF account and start depositing money in it.