Public Provident Fund

Public Provident Fund (PPF)

Public Provident Fund is handled by Government of India. You have to contribute a minimum of Rs. 500 each year. The current interest rate is 8% per annum. PPF investments are eligible for Tax exemption under section 88. The maximum amount for Tax exemption is Rs. 100000. You can draw part of the amount after 7 years from Provident Fund. You can also avail loan on PPF after 3 years. This 15 years scheme can be extended in multiples of 5 years optionally.

Some companies have made PF compulsory to their employees. 12% of amount from the salary (Basic+DA) is deducted towards PF contribution. Company will also contribute the same 12%. So total of 24% of the salary goes to savings.

NSC - National Savings Certificate

The duration of NSC deposit if for 6 years. Minimum deposit is Rs. 1000 and maximum is Rs. 100000. This amount is eligible for Tax deduction under section 88. Interest income from NSC is also exempted from Tax.

Post Office Monthly Income Schemes

This scheme is for 6 years. Interest rate is 8%. At the end of the 6 year term a 10% bonus is given. For example if you invest Rs. 1 lac in this scheme you will get Rs. 666 each month for 72 months and at the end of the 72 months you will get the investment back with Rs. 10000 bonus.

Kisan Vikas Patra - KVP

Deposits in KVP will double in 8.5 years. There is no Tax benefits for investments in KVP. The deposit can be withdrawn after 2.5 years if you wish to do so.

Fixed Deposits in Companies: Interest rates will vary often. It depends on the term of deposit. There is no Tax benefit for the Interst income. If you get more than Rs. 5000 interest in a year TDS (Tax Deducted at source) will be deducted for that income.