The Public Provident Fund (PPF) Account:
1. is aimed at generating capital appreciation
2. provides avenues for regular income
3. is suitable for long-term saving and for availing of tax incentives
Which among the above is / are correct statements?
A PPF account is not aimed at generating capital appreciation since it has no secondary market. It is mainly suitable for long-term saving and for availing of tax incentives. The lump-sum amount that you receive on maturity (at the end of 15 years) is completely tax-free. PPF does not provide any avenues for regular income. It provides for accumulation of interest income over a 15-year period, and the lump-sum amount (principal + interest) is payable on maturity. A PPF account does not provide protection against high inflation. In certain years when the inflation rate is high, the real rate of return on your PPF may be marginal. This depends on the prevailing rate of interest on your PPF at any given time. These rates are notified by the GOI in the Official Gazette from time to time, and are calculated in such manner as is specified in the scheme. One can borrow against his / her PPF account.
The loans can be availed of from the third to sixth year @ 1 per cent per annum if repaid within 36 months. Else, interest on loan is set at 6 per cent per annum. Amount of such loans will not exceed 25 per cent of the amount that stood to your credit at the end of the second year immediately preceding the year in which the loan is applied for. You will continue to earn interest at the specified rate on your balance in the PPF Account after availing of the loan facility.
This question is a part of GKToday's Integrated IAS General Studies Module