Public Provident Fund (PPF) disadvantages: We have often heard that Public Provident Fund has several advantages but rarely does anyone talk about Public Provident Fund disadvantages. No doubt, PPF is a good savings scheme that can help you accumulate a large corpus over the long term. But like other savings schemes, PPF also has some disadvantages that you should consider before investing. In this article, we will talk about several disadvantages of public provident fund (PPF).
1.Interest rate is less compared to EPF interest rate:For salaried employees, one disadvantage of PPF is in terms of interest rate. The current PPF interest rate stands at 7.1%, which is lower compared to the EPF interest rate of 8.15% for FY 2022-23.
2.Higher lock-in period:The PPF account has a maturity period of 15 years. This scheme is best suited to those who want to invest for a very long term. For any short-term needs, investors might need to look for other options.
3.Limit on maximum deposit:The maximum amount one can deposit in a PPF account is fixed at Rs 1.5 lakh. The Government has not raised this limit for the last several years. For salaried employees, who want to invest a higher amount, VPF serves as a better option where an amount of up to Rs 2.5 lakh can be allocated from salary sans any extra tax outgo.
4.Stringent early withdrawal rules:Before investing in PPF you should always keep in mind for early withdrawal rule. There are several strict rules for premature withdrawal. For example, you can make only one withdrawal during one financial year and that too after five years, excluding the year of account opening. Thus if you start a PPF account in FY 2023-24, you can make the first withdrawal only during FY 2029-30.
5.Early premature closure not allowed:Remember, early closure of a PPF account is not allowed. If you wish to discontinue investing in a PPF account, you cannot close it prematurely whenever you want. According to PPF rules, premature closure is allowed only after five years from the end of the year in which the account was opened and even that is subject to certain conditions:
· For treatment of life-threatening disease of the account holder, spouse of the account holder, parent and dependent children
· Higher education of accountholder/dependent children.
