The PPF investment limit has not been raised for several years. However, the popularity of the scheme has been constantly growing. Given that, Institute of Chartered Accountants of India (ICAI) has demanded an increase in PPF limit.
Ahead of Union Budget 2023, experts have proposed the government to increase the limit of Public Provident Fund (PPF) to Rs 3 lakh. Currently, Section 80C of Income Tax Act provides deductions on various investments up to Rs 1.5 lakh per year from one's taxable income. This section covers PPF/Employees' Provident Fund (EPF), Equity Linked Saving Scheme (ELSS), National Pension System (NPS), and more. Now, experts are demanding to escalate the limit of PPF to Rs 3 lakh.
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Why the proposal?
The PPF investment limit has not been raised for several years. However, the popularity of the scheme has been constantly growing. This retirement-focused investment instrument attracts investors because of its Exempt-Exempt-Exempt (EEE) tax status. The maturity amount and the overall interest earned during the investment period are tax-free.
Given that, Institute of Chartered Accountants of India (ICAI) has demanded an increase in PPF limit and said that this will boost the domestic savings as a percentage of GDP and will have an anti-inflationary impact.
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The ICAI said that the increase in the deposit limit of PPF is important as it is the only safe and tax-efficient savings scheme which is made available to self-employed persons as well as salaried individuals.
“While the assessees in employment have the compulsion of saving 12 percent of their salary (with a matching contribution from employers), the only safe and tax-efficient option available for self-employed assessees is PPF. Hence, we suggest government to increase the ceiling of PPF contribution to Rs 3 lakh,” said the ICAI.
In 2014, the limit for maximum deduction under Section 80C was raised to Rs 1.5 lakh. Although, the continuous rise in living expenses exhausts this limit in just one or two contributions. And, no more scope is left for further tax saving under Section 80C.
Tapati Ghose, Partner, Deloitte India also thinks that government should look at increasing this limit to Rs 2.5 lakh, considering the increase in cost of living and inflation.
"This will have two-fold benefits, viz., individual taxpayers would be willing to save more and will benefit from a lower tax outgo, thereby increasing disposable income to meet the increase in price of various' commodities," she said.
PPF has a lock-in period of 15 years and individuals can invest Rs 1.5 lakh in a year in it. The interest rate on PPF is reviewed every quarter and may change depending on the government announcements. At present, it offers a tax-free return of 7.1 percent annually.
In order to open a PPF account with the post office, customers are required to visit the office once and then they can handle the account online with India Post Payments Bank (IPPB) app.
(Edited by : C H Unnikrishnan)