Tax Deductions on Public Provident Fund Investment

Hello and welcome to Part 14 of the Income Tax education series brought to you by H&R Block, the global leader in filing Income Tax Returns. Today we will understand the tax benefits of investing in a Public Provident Fund account.

Public Provident Fund account has been an extremely popular saving scheme as well as a tax saving instrument for years. A PPF account gives you tax benefits like

1. A deduction from your taxable income u/s 80C up to Rs. 1,50,000
2. The interest that accrues on this account is tax free
3. The maturity proceeds that you receive at the end of its tenure of 15 years are also tax free

Hence this is three way tax saving account with investments being tax saving and interest and maturity proceeds being tax free. There is a misconception here that the money has to go from your account into the PPF account. However this is not so as the deduction can be claimed on the basis of deposits made into the account and not based on the source of money. E.g. Shiva has a PPF account and invests an amount of Rs. 75,000 each year in this account. He enjoys a tax deduction for this amount of Rs. 75,000 each year from his taxable income. In 2015 however he forgot to put money in this account and realized this in March 2015. Since he did not maintain an adequate balance in his account he transferred an amount of Rs. 75,000 from his father’s account. In this case where the money is not deposited from Shiva’s account, he can still claim the deduction because the source of money was different than the person claiming the deduction. The deduction can be claimed based on the fact that investment was made in Shiva’s PPF account.

I hope you found this useful. If you have any further questions on this topic, please feel free to ask us using #AskBlock.
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