Is investing in ppf a good idea?
Public Provident Fund (PPF) is one of the most preferred long-term investment instruments among the investors who have zero risk appetite. In this investment, the investor not only manages an assured return but also gets income tax exemption on investment up to Rs. 1.5 lakh in a particular financial year.
- The lock-in period is long-term, i.e., for 15 years.
- Joint accounts are not permitted, i.e., one person can only handle one account except it is of a minor.
- NRIs and HUFs cannot open an open account.
- There is a maximum limit of Rs. 1.5 lakhs laid for depositing in a PPF account.
- There is no liquidity.
Due to compounding over the long-term, you may end up losing much more money. Assuming the interest rate of 7.1% throughout the lock-in period of 15 years, an individual depositing Rs 1.5 lakh every year in the PPF account on April 1 every year will earn Rs 40,68,208.
However, PPF offers much lower returns over a longer time horizon than ELSS. The tax benefits and capital safety are more in favour of PPF; ELSS certainly is an option for better returns. It depends on whether you have the appetite for market volatility or not.
In addition to this, one must keep in mind that the minimum monthly balance between the last and fifth day of the month forms the basis for calculating the Public Provident Fund's interest. Therefore, if you are planning to invest in PPF on a monthly basis, it would be best to invest before the 5th of each month.
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PPF VS LIC.
| Points | LIC | PPF |
|---|---|---|
| Risk | Safe | Safest |
| Target audience | Caters to those who have dependents | Caters to everyone |
| Tenure | Flexible | 15 years |
Being one of the most trusted sources of investment, it should have the option of online transactions as well as checking the account. One can open the account for PPF through bank as well as through post office, and most of the banks provide the online facility but not the post offices.
If one continues to invest Rs 1.5 lakh/year for another five years, then PPF balance will reach approx. Rs 1 crore in 25 years. This, it is indisputable that PPF is still the Best available investment instrument for reasons stated above.
| Investment Period | Total PPF Investment | Total Interest Earned |
|---|---|---|
| 15 years | Rs. 1.5 lakh | Rs. 1.4 lakh |
| 20 years | Rs. 2 lakh | Rs. 2.88 lakh |
| 30 years | Rs. 3 lakh | Rs. 9 lakh |
PPF offers consistent profits and is best suited for low-risk investors. Mutual fund houses, on the other hand, invest in a wide range of asset classes, including stocks, bonds, and government bonds. As a result, it has a bigger potential for higher returns, but because it is market-linked, the risk is also higher.
Can PPF increase future?
The interest rate on PPF is revised by the Government on a quarterly basis. The current interest rate is 7.1%. The PPF interest rate for the first quarter of 2022 remains unchanged.
Public Provident Fund PPF investment is low risk because it is backed by the Government of India.
The interest income generated by FDs is taxed as per the applicable tax slab of the depositor. Whereas in case of PPF, the interest income and maturity proceeds are totally tax-free, making its post-tax returns one of the highest ones amongst all fixed-income tax-saving instruments.
About SBI PPF Account
State Bank of India (SBI), which is the largest bank in the country, offers the PPF scheme with a good interest rate. SBI has over 15,000 branches in India, therefore, getting access to the scheme is easy. Opening of the PPF account offered by SBI can also be done online.
If you invest wisely in PPF, you can rake in Rs 1 crore at the time of maturity by investing a few thousand every month. For this, you will need to invest Rs 1.5 lakh per year, which translates to Rs 12,500 per month.
If you deposit money early in the month you would get the advantage of interest added on the contribution before 5th of the month. You can also invest a lump sum on or before 5th April of a year in order to get the interest for the whole year.
- National Savings Certificate.
- Senior Citizen Savings Scheme.
- Recurring Deposits.
- Post Office Monthly Income Scheme (MIS)
- Public Provident Fund (PPF)
- KVP (Kisan Vikas Patra)
- Sukanya Samriddhi Yojana (SSY)
- Atal Pension Yojana.
Even for monthly PPF deposits, it is best to make the payments before the fifth of every month since interests are calculated from the fifth. This will give the investor the opportunity to maximise income.
1) How to maximise PPF interest earnings: The interest rate on PPF deposits is not fixed. The government revises interest rates every quarter, depending on the yields of government bonds. The interest is compounded annually and credited at the end of the financial year.
Tenure: The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish. Investment Limits: PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 instalments.
How many times PPF deposit in a month?
An individual can deposit money into a PPF account, a maximum of 12 times, during a given financial/fiscal year. Also, not more than two deposits can be made to the PPF scheme, during any given month.
PPF stands for Public Provident Fund. It has been introduced in 1968 for the aim to mobilize small savings into an investment with reasonable returns with additional benefits to save tax. It helps one build a retirement corpus. The current interest rate on PPF is 7.1% compounded annually.
Premature closure of the PPF account is allowed only 5 financial years after the account is opened.
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How To Beat Inflation With Investments?
| Fees for B.Tech Course (current) | ₹10 lakh |
|---|---|
| Rate of Inflation in education | 10% |
| Fees for B.Tech Course after 15 years | ₹41.77 lakh |
| Amount invested in PPF | ₹10 lakh |
Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and National Pension Scheme (NPS) mandate a minimum investment every fiscal. Mint tells you what you may lose on defaulting and how to revive a dormant account. PPF : The mandatory minimum investment required in PPF is ₹500 to keep it active.
PPF New Rule
An individual can not have multiple PPF accounts under his or her name, according to the PPF rules, 2019.
PPF account: A Public Provident Fund (PPF) account is an EEE investment where you get income tax exemption on investment up to Rs 1.5 lakh per annum. It is to be noted that an earning individual cannot have more than one PPF account and one cannot invest more than Rs 1.5 lakh in their PPF account in a particular year.
The interest is computed on the lowest balance in the account between the fifth and the last day of the month for the calendar month. Interest will be paid to the account at the end of each financial year.
Going by that definition, both the EPF and PPF are debt investments – an assured rate of return, and the principal will be returned over a predetermined tenure. So yes, they are both part of the debt portfolio.
While we have often written on the importance of equity in a portfolio to beat inflation and create wealth, we have never stated that it must be the only asset class in your portfolio. The Public Provident Fund, or PPF, is the perfect example of an investment every individual must consider.
What does govt do with PPF money?
PPF tax concessions
PPF falls under EEE (Exempt, Exempt, Exempt) tax basket. Contribution to PPF account is eligible for tax benefit under Section 80C of the Income Tax Act in the old Tax Regime. Interest earned is exempt from income tax and maturity proceeds are also exempt from tax.
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PPF Interest Rate.
| Time Period | Interest Rate (p.a.) |
|---|---|
| 1 July 2021- 30 September 2021 | 7.10% |
| 1 April, 2021 - July 2021 | 7.10% |
| 1 January, 2021 - 31 March, 2021 | 7.10% |
| 1 October, 2020 – 31 December, 2020 | 7.10% |
1. A PPF account holder can fully withdraw the account balance only upon the scheme's maturity i.e., post the completion of 15 years. 2. In case of financial emergency, partial PPF withdrawal is allowed from seventh year of account opening.
Individuals who invest in PPF can withdraw their money after eight years. Currently, the lock-in period lasts for six years. The tenure of PPF is also expected to be increased by 5 years to 20 years. The customer has the option to choose their saving period and the term can be either 15 years or 20 years.
Risk factor: Since PPF is backed by the Indian government, it offers guaranteed, risk-free returns as well as complete capital protection. The element of risk involved in holding a PPF account is minimal.
Lack of liquidity as it offers limitations on PPF Withdrawal. It has a big lock-in period of 15 years. There is a capping of Rs 1.5 lakh per annum on deposit of amount in a PPF account. Offers lower returns as compared to other investment avenues such as NPS, Mutual Funds, etc.
1. A PPF account holder can fully withdraw the account balance only upon the scheme's maturity i.e., post the completion of 15 years. 2. In case of financial emergency, partial PPF withdrawal is allowed from seventh year of account opening.
- The Safest Plan. PPF is initiated by the government, so there is no possibility of someone running away with your money. ...
- Great Returns. ...
- Compound Returns. ...
- No Tax on Interest Earned. ...
- Flexible Investment. ...
- No tax on Maturity Amount. ...
- Online Maintenance. ...
- Free of Stock Market Influence.
| Investment Period | Total PPF Investment | Total Interest Earned |
|---|---|---|
| 15 years | Rs. 1.5 lakh | Rs. 1.4 lakh |
| 20 years | Rs. 2 lakh | Rs. 2.88 lakh |
| 30 years | Rs. 3 lakh | Rs. 9 lakh |
Public Provident Fund is one of the most popular fixed income products, thanks to its tax benefits and long-term assured returns. HDFC Bank offers easy ways of investing in PPF online. Instantly transfer funds from a linked savings account or set-up standing instructions for automatic debit.
Is it wise to invest in PPF now?
Public Provident Fund (PPF) is one of the most preferred long-term investment instruments among the investors who have zero risk appetite. In this investment, the investor not only manages an assured return but also gets income tax exemption on investment up to Rs. 1.5 lakh in a particular financial year.
PPF has a maturity period of 15 years after which you can choose to withdraw funds from your PPF account. Partial withdrawals are also allowed before the account matures (after the 6th financial year from account opening) but only under certain circ*mstances.
PPF account: A Public Provident Fund (PPF) account is an EEE investment where you get income tax exemption on investment up to Rs 1.5 lakh per annum. It is to be noted that an earning individual cannot have more than one PPF account and one cannot invest more than Rs 1.5 lakh in their PPF account in a particular year.
What happens if the PPF account holder dies? In the event of the death of the PPF account holder, the balance amount in the PPF account will be paid even before the completion of 15 years, to the nominee or legal heir of the deceased person.
According to tax and investment experts, a PPF account holder has three options after the maturity of PPF account — PPF balance withdrawal, PPF account extension without investment and PPF account extension with investment option.
