The Public Provident Fund (PPF) is one of the most common long-term investment options for investors with a low risk tolerance. This investment provides the investor with not only a guaranteed return, but also income tax exemption on investments up to Rs 1.5 lakh in a given financial year. But what about investors who have used up their 1.5 lakh PPF investment limit but still have money to invest? If the investor is married, opening a PPF account in the name of one’s spouse may be a good choice, according to tax and investment experts.
According to experts, opening a PPF account in the name of a partner allows an investor to double their PPF investment limit, although the income tax exemption limit remains at Rs 1.5 lakh.
Speaking on how PPF account in the name of spouse helps an investor double one’s PPF interest income; an expert said, “If an investor has zero risk appetite and it has exhausted its PPF investment limit of Rs 1.5 lakh per annum. It is preferable to open a PPF account in your spouse’s name. As the source of investment in both accounts is the investor himself, the earning person would not be able to seek an income tax exemption in excess of Rs 1.5 lakh. However, PPF has certain additional benefits, such as income tax exemption on PPF interest and maturity amounts. The investor would be able to double his or her investment limit from 1.5 lakh to 3 lakh by opening a PPF account in the name of his or her spouse, and will benefit from income tax exemption on PPF interest received and PPF maturity sum in both PPF accounts.”
On how income tax laws benefit investors who open PPF accounts in their own names and in the names of their spouses; said an expert, “After investing in a spouse’s PPF account, the husband’s source of income remains the same, and therefore its income is added to the husband’s.” However, since PPF interest is tax-free, interest paid in a spouse’s PPF account is not included in the husband’s net income. Similarly, the husband receives an income tax gain on the PPF maturity balance that has accrued in his wife’s PPF account.
Another Expert said, PPF investment is limited at 1.5 lakh per financial year under Section 80C of the Income Tax Act, so if the husband’s limit is reached, he will lose the income tax gain on his PPF investment. Otherwise, the husband would receive all of the same benefits from his wife’s PPF account as he does from his own.
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