Did You Know You Can Double Your PPF Income And Save Tax?

PPF is among the popular investment saving options and is even highly tax efficient, coming in the 'EEE' category i.e. investment or contribution of up to Rs. 1.5 lakh in a year under Section 80C that allows tax deduction, interest income earned on the interest and the maturity amount.

Nonetheless, if the person wishes to increase his contribution to the PPF income and also get tax benefit then a married man has an advantage that he can invest another Rs. 1.5 lakh in his wife's PPF account. Note an individual cannot invest over Rs. 1.5 lakh in a year in his PPF account.

Taxation of income earned against wife's PPF account

As per Section 64 of the Income Tax Act, any income that accrues to your wife on the amount or assets gifted by you shall be added to an individual's income. But in the case of PPF that is completely tax free, the clubbing provision shall not result in any implications.

Nonetheless, when the maturity proceeds of her PPF account as and when received in the future, the income accruing in relation to your initial investment into your wife's PPF account shall be added in your income year after year.

So, this options gives a married man an opportunity to increase his contribution to the PPF account. This is also advisable in case for a particular year one has exhausted his 80C limit and wishes to earn interest free income, one can consider opening PPF account for his spouse. Note that, the overall income tax exemption under Section 80c on investments will continue to remain capped at Rs 1.5 lakh per annum.

The option can be a best advice for those who have low risk appetite and do not want to invest in market linked instruments such as NPS , mutual funds among others. At present PPF rate is 7.1%.

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