PPF
If you haven't already started on a long-term savings strategy, you could begin with a Public Provident Fund (PPF) subscription . A government-guaranteed fixed income security, this is very apt as a long-term savings instrument. Yearly subscriptions can be as low as Rs. 500 to as high as Rs. 70,000.
It counts being among the most secure investments you can have in this country. The interest earned on the PPF subscription is compounded; that means you not only earn interest in the money you put in, but you earn interest on the interest earned too. All the balance that accumulates over time is exempt from wealth tax.
A flip side, its an extremely illiquid investment instrument. Its lengthy lock-in period works out to 16 years since the last contribution is made in the 16th financial year. In all, the PPF is a very good savings instrument, and you should consider investing in it.
PPF: Basics
Who can open a PPF account?
Any individual can open a PPF account, either for himself/herself or on behalf of a minor. Even if you are a part of a General Provident Fund (GPF) or Employees Provident Fund (EPF) scheme, you can subscribe to the PPF.
Where can I open a PPF account?
You can open a PPF account at any branch of the State Bank of India (SBI), its associated banks, such as the State Bank of Mysore or Hyderabad, or with some other nationalized banks. A PPF account can also be opened at any head post office, selected grade post offices, or a General Post Office (GPO).
As a depositor, you may find it easier to open an account at a post office instead of a bank. Banks may be reluctant to open PPF accounts because they do not earn additional fees to handle these accounts. The money invested in the PPF is credited to the Reserve Bank of India (RBI) the same day. You will be given a passbook where all subscriptions, accrued interest, withdrawals, loans etc. are recorded.
Can an individual have more than one PPF account?
No, an individual cannot have two PPF accounts in their name at the same time. Doing so will invite a penalty. If the issuing authority (bank or post office) detects two accounts during the tenure of the scheme, you will get back only the principal you put into the account, sans any interest.