Investing in a PPF account is one of the best ways to save on taxes. Find out why!
The PPF (Public Provident Fund) is an investment scheme that allows individuals to invest money tax-free. It is similar to a pension plan, except that the government manages it instead of private companies.
The rate of return is also relatively high when compared to other fixed deposit schemes, which are the best choice for any investor.
Claim Tax Deduction on Interest Paid
If you have invested in a PPF account, then you can claim interest paid as a deduction against your income tax.
This means that you will not pay any additional tax on the interest earned. However, you need to keep track of the interest payments made to the PPF account.
Tax Deductions on Investment losses
If you have lost money while investing in a PPF account, you can claim investment losses as a deduction against your taxable income.
It is possible to claim such deductions even when you have not yet received the returns from the investments.
Tax Exemptions on Contributions Made
If you make contributions to a PPF account, you can claim tax exemptions for these contributions.
This implies that you won’t have to pay taxes on the interest the PPF account earns.
Not only the interest-earned portion. The total capital invested is also exempt. However, the maximum amount that you can invest annually is capped at ₹1.5 lakh.
Tax Benefits on Capital Gains
In addition to claiming tax benefits for contributions made into a PPF account, there are also tax advantages associated with capital gains.
These include tax deductions for losses incurred when selling an asset, as well as tax credits for investments made in certain assets.
Tax Benefit on Repayment of the Loan
If you have borrowed money from a bank or financial institution, then you can claim tax benefits for repayment of the loan.
Loans and advances for purposes such as education, home construction, and land purchases are eligible for tax exemption. In addition to the tax benefits that you get from investing in PPF, this will help you reduce your taxable income.