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February 03, 2005 09:50 IST
Considering the current level of interest rates, the public provident fund (PPF), which offers 8 per cent tax-free interest, is indeed very attractive. Therefore, strive to invest the maximum permissible Rs 70,000 in it every year. Contribute, even if the rebate under Section 88 is not available by virtue of your taxable income being above Rs 500,000, because the returns are very good. Yes, there is the issue about the average term of PPF being 16 years. But remember, the average lock-in period is much less. The normal feeling is that it is fallacious to open a PPF account after one becomes a senior citizen. It is not too late for anyone. Also, have a PPF account in the name of every adult member of the family, even if he or she is not a taxpayer at present. Another thumb rule is, always put the money into PPF right in the beginning of the year for two reasons: One, this will give you maximum returns for the year and second, because contributions no longer need to come out of your income chargeable to tax. Do not use the premature withdrawal facility, unless there is extreme emergency. Allowing the compounding factor to work gives magical results.
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