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PublicProvident
Fund
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PPF is a long-term, government-backedsmall savings scheme of the Central
government started with the objectiveof providing old age income security tothe workers in the unorganised sectorand self-employed individuals. The PPF
was started in 1968 with the aim ofhelping informal sector workers to savefor their retirement.
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What is the interest rate offered
through PPF?
Currently, the interest rate offered throughPPF is around 8 per cent, which is
compounded annually. Interest iscalculated on the lowest balance betweenthe fifth day and last day of the calendarmonth and is credited to the account on
March 31 every year. So to derive themaximum, the deposits should be madebetween 1st and 5th day of the month.
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What is duration of the
investment?
People who are interested inliquidity or small-term gains would
not be very keen about PPF becausethe duration for the investment is15 years.
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However, the effective period worksout to 16 years i.e., the year of
opening the account and adding 15years to it. The contribution madein the 16th financial year will notearn any interest but one can take
advantage of the tax rebate.
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The account holder has an option toextend the PPF account for any
period in a block of five years afterthe minimum duration elapses. Theaccount holder can retain theaccount after maturity for any
period without making any furtherdeposits.
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The balance in the account willcontinue to earn interest at normal
rate as admissible on PPF accounttill the account is closed.
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What is the minimum and
maximum amount of deposit?
The minimum deposit that you can
make into a PPF account in a year isRs 500. The maximum is Rs 70,000
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Who can open a PPF account
and where?
A PPF account can be opened by anindividual (salaried or non-salaried) on
his own behalf or on behalf of a minor ofwhom he is the guardian or on behalf ofa Hindu Undivided Family (HUF) ofwhich he is a member or on behalf of an
association of persons or a body ofindividuals. An individual can open onlyone account for himself.
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A PPF account can be opened with aminimum deposit of Rs 100 at any branchof the State Bank of India or branches ofits associated banks like the State Bank of
Mysore orH
yderabad. The account canalso be opened at the branches of a fewnationalized banks, like the Bank of India,Central Bank of India and Bank of
Baroda ,and at any head post office orgeneral post office.
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What are the tax benefits from
PPF
The amount you invest is eligible fordeduction under the Rs 100,000
limit of Section 80C. On maturity,the entire amount including theinterest is non-taxable.
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Is it possible to withdraw the amount
deposited at any time during thetenure?
Yes. You can take a loan on the PPF
from the third year of opening youraccount to the sixth year. So, if theaccount is opened during the financialyear 2009-10, the first loan can betaken during financial year 2011-12(the financial year is from April 1 toMarch 31).
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The loan amount will be up to amaximum of 25 per cent of the
balance in your account at the endof the first financial year. You canmake withdrawals during any oneyear from the sixth year.
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What is the difference between
PPF and PF?
The Employee Provident Fund, orprovident fund as it is normally
referred to, is a retirement benefitscheme that is available to salariedemployees. The Employees ProvidentFund (EPF) scheme was started in
1952. The participation was mademandatory for private and publicenterprises in 177 specified sector
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Under this scheme, a stipulatedamount (currently 12%) is deducted
from the employee's salary andcontributed towards the fund. Thisamount is decided by thegovernment.
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The employer also contributes an equalamount to the fund.
However, an employee can contributemore than the stipulated amount if the
scheme allows for it. So, let's say theemployee decides 15% must bededucted towards the EPF. In this case,the employer is not obligated to pay any
contribution over and above the amountas stipulated, which is 12%.
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What is the return on thisinvestment?
EPF: 8.5% per annum PPF: 8% per annum
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PPF
The accumulated sum is repayable
after 15 years. The entire balance can be
withdrawn on maturity, that is, after15 years of the close of the financial
year in which you opened theaccount.
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How long is the money blocked?
EPF
The amount accumulated in the PF ispaid at the time of retirement orresignation. Or, it can be transferred
from one company to the other ifone changes jobs.
In case of the death of the employee, theaccumulated balance is paid to the legal
heir.
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What is the tax impact?
EPF The amount you invest is eligible for
deduction under the Rs 1,00,000 limit ofSection 80C.
PPF The amount you invest is eligible for
deduction under the Rs 1,00,000 limit ofSection 80C.
On maturity, you pay absolutely no tax.
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The better option?
In both cases, contributions get adeduction under Section 80C and the
interest earned is tax free. In the case of PF, the employer also
contributes to the fund. There is no suchcontribution in case of PPF.
The rate of interest on PF is also marginallyhigher (currently 8.50%) than interest onPPF (8%).
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NRI BANK
ACCOUNT
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Today, there a number of Indiansworking abroad. Therefore, the
banking services catering to thetransfer of funds, savings, earnings,investments, and repatriation ofNon-Resident Indians have grown
tremendously.
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Repatriation of currency
When foreign currency is convertedback to the currency of the home
country it is referred to asrepatriation. An example would bean American converting BritishPounds back to U.S. Dollars.
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Banking laws for NRIs allow for thefollowing deposit schemes, or
simply put, accounts withauthorized dealers -- banks andfinancial institutions authorized byReserve Bank of India to deal in
foreign exchange -- to bemaintained in Indian rupees and inforeign currency
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A non-resident Indian (NRI) isan Indian citizen who
has migrated to another country, aperson of Indian origin who is bornoutside India, or a person of Indianorigin who resides outside India.
Other terms with the same meaningare overseasIndian and expatriate Indian
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. In common usage, this oftenincludes Indian born individuals
(and also people of other nationswith Indian blood) who have takenthe citizenship of other countries.
A Person of Indian Origin (PIO) is
usually a person ofIndianorigin who is not a citizen of India
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TYPES OF ACCOUNT
FCNR-- Foreign Currency Non-Resident Account
NRE -- Non-Resident ExternalRupee Account
NRO -- Non-Resident OrdinaryRupee Account
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FCNR Accounts
These accounts are only for term
(fixed) deposits with the maturityranging from one year to threeyears.
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Currency used:
Pounds Sterling
US Dollars Japanese Yen
Euro
Australian Dollar (AUD) Canadian Dollar (CAD).
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The euro (sign: ; code: EUR) is theofficial currency of the eurozone: 17 of
the 27 member states of the EuropeanUnion (EU).The eurozone consists ofAustria, Belgium, Cyprus, Estonia,Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, Malta, theNetherlands, Portugal, Slovakia,Slovenia ,Spain.Montenegro, Andorra,Monaco, San Marino, Kosovo and theVatican and is conse uentl used dail
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Accounts only for term depositsranging from one year to three
years. Principal, as well as interest, earned
on these accounts is transferableoutside India in the same currency
or in other convertible currency.
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The interest, earned on thesedeposits, is exempt from Indian
Income Tax.
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NRE Accounts
NRE accounts are opened in Indian
rupees and all foreign exchangedeposits received for credit of theseaccounts are first converted toIndian rupees at the buying rates
by the banks
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Currency used:
Indian rupees (all foreign exchange
deposits received need to be firstconverted to Indian rupees at thebuying rates by the banks)
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Features:
Withdrawals in foreign currency are
permitted provided The Indianrupees in the account are convertedto foreign currency at the sellingrate. This conversion loss is to be
borne by the account holder
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Deposits and their interests are freeof Indian Income-tax.
The entire credit balance (inclusiveof interest earned accumulated) canbe repatriated (send back) outsideIndia at any time without requiring
permission from the RBI.
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Local disbursement from theaccounts can be made freely.
Account holders can avail ofloans/overdrafts from banks againstsecurity of fixed deposits in theirNRE accounts.
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The balances in the accounts arefree ofWealth-tax and gifts to close
relatives in India are free of anyGift-tax
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NRO Accounts
A bank account, held by a person
designated as NRI, in India isdesignated as an Ordinary Non-resident Account (NRO Account).
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Currency used:
Indian rupees
Features: Accounts can also be opened with
funds deposited from abroad.
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As funds in this type of account arenon-repatriate, they cannot be
deposited abroad to the accountholders or transferred to their NREAccounts without the ReserveBank's prior permission.
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Interest earned on these deposits isnot exempt from IndianIncome-tax.
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THANKS FOR ATTENDING MYCLASS
SAURABH GARG