Section I: Income Tax and Your Investments

• Ques: PPF gives tax-free and risk-free return
• Ans: Key points:
  • PPF returns are tax free and risk free. You earn interest @8% annually.
  • You can invest in PPF in your spouse or child name and without adding to your tax liability as the interest is tax free.
  • Effective returns are up to 11.5% if you add the tax benefits.
  • PPF is must for your child's safe and secure future. For example, if you invest regularly Rs. 70,000 p.a. in PPF from the 1st birthday of your child, it will become tax free Rs. 30 lakh approx when he/she becomes 21 years.
  • Partial withdrawal from PPF can be used for education or marriage or house renovations.
  • PPF account allows deposit up to 15 years. Thereafter, you can hold money there for further five years at same interest.