What is the Public Provident Fund- Public Provident Fund or PPF is one of the most popular long-term investment schemes.
But all the long-term investment schemes or popular schemes may not be right all the time.
So here we will discuss all the good points and not-so-good points about PPF. We all want to invest our money.
But most of the time we don’t know where to invest and where not. That’s why we lose plenty of good opportunities.
So we need to have proper information or knowledge before investing our money. We will give you an unbiased analysis.
There are many more long-term options available in the market to invest in. But PPF is giving some extraordinary features.
Also, there are some features which you may not like. But you should know that before investing in Public Provident Fund.
You will get a bonus tip also. Here is the list of content that we will discuss are-
Now let’s discuss all the points one by one.
1.What is PPF.? (What is the Public Provident Fund )–
It is a government scheme. If you are 25 today and planning for your retirement at the age of 50 or under 50 then you can think about this plan.
It is a plan of 15 years. someone in you may think that it is the same as EPF. But it is not.
Many people did LIC to survive after their retirement.
But we think that should not invest in a plan where you are getting both the investment and insurance facility in that.
You should not mix your investment and insurance.
Your insurance part should be different from your investment.
Here you don’t need to do any job to invest. No matter you are doing a job or not, you can invest here.
You can invest a maximum of 1.5 lac rupees per year and a minimum of 500 rupees per year.
You can invest more than 1.5 lac in a year but you will not get all the benefits like the tax deduction over the amount of 1.5 lac.
You can choose the monthly or yearly option to invest here.
Now if you invest for 2 or 3 years and not able to invest after that then what will happen.?. Nothing will happen.
Just you will not get the interest amount on the invested amount.
After that, if you pay then the interest will be calculated from that time you are paying.
So if your account is inactive then you will no get the interest for the time being.
2.The benefits of investing in PPF—
You cannot grow your money if you are not investing your money. As well as you need to remember that you can’t be rich by just only investing your money.
You need to invest it in a right place.
Many people don’t want to invest in stocks or mutual funds because they don’t understand this properly. In this case, they find some best government funds to invest in.
So this can be one of them. Now you will ask that why PPF then.? Well, we will clear it one by one.
3.Returns of PPF ( What is the Public Provident Fund )–
The return of this scheme is revised by the government quarterly. Now the scheme is giving 7.1 percent interest per year.
It was 7.9 percent a few months back.
Usually, you can earn 1.5 to 2 percent more interest than some of the major banks like SBI, Axis, HDFC E.T.C.
SBI is presently giving almost 5.8 percent interest on FD. It is giving 7.1 percent now.
So you can understand the difference. But it was 8 or above 8 before this pandemic running in the world now. So it can be a reason for the lower interest rate.
We think that this will surely increase after few years.
Now many of you can think there are many small banks available in India that are giving 7-8 percent interest on FD. So this scheme is not that good.
But there is much more reason which makes it very interesting.
So read the article carefully if you are thinking of a long-term retirement plan.
Now we will talk about the lock-in period. That means when will you get your invested money. Here is a lock-in period of 15 years. This is not like FD.
In FD you can select the tenure you want to invest for.
But here you can’t.
You can also extend this scheme for 5 years after completing the 15 years. You can extend as many times as you want.
The extended period will be 5 years.
If you are extending the scheme for the next 5 years then you can also withdraw all the amount of the last 15 years if you want.
But you can withdraw only one time in a year. You can withdraw the whole amount or you can withdraw a part of it.
Now if you want to withdraw it earlier then also there are some exceptions to it. These are-
1.You can withdraw 50 percent of your invested money after 5 years.
2. If there is any kind of emergency came in the future like- children’s education, illness then you can close the account and can withdraw all the money.
This is called premature closure. This also you can do after 5 years. But this is very rare.
3.If you invested 2 lac rupees in the first two years then after two years you can get 25 percent of 2 lac that means 50 thousand rupees as a loan. Not advance.
You can get it from the bank where you have your PPF account.
These are the exceptions available in it.
5.Tax benefits ( What is the Public Provident Fund )–
Let’s assume your income is 8 lac rupees per year. Now if you are investing 1.5 lac rupees per in the PPF account.
Then you will not have to give any tax on that 1.5 lac rupees.
It will be assumed that your income is 6.5 lac rupees per annum.
You need to give tax on that 6.5 lac rupees. As well as you don’t need to give any tax on the amount you are earning from the interest.
Here it is better than FD.
Now when you are withdrawing the whole amount ( suppose 10 lac rupees with interest ) then also you need to pay any tax on that amount.
Here it is far better than FD if you are your retirement.
As well as there most important thing that you should know is–
If there is any kind of legal case on you and you need to pay compensation to someone then your property can take possession of by the court if you are not paying the amount.
But PPF is the only thing that can’t be attached. Even any of our courts can’t take money from your PPF account.
Because it is assumed that if you are investing in PPF then the money is for your dependents, not your.
6.Risk factors ( What is the Public Provident Fund )–
It has no risk factors. You know that this is a government scheme. So as such, there are no risk factors.
7.How to invest.?–
You can invest here from any bank you are using. You can open an account in a bank or a post office near you.
If you are using internet banking or mobile banking then you can invest here through the bank’s app or internet banking.
Also if you want to deposit offline then you can visit the bank. You also need to visit the post office to deposit money. You can open it online or offline both.
8.Who can invest.? ( What is the Public Provident Fund )-–
There is no age limit to open this account. Anybody can open this account. A boy/girl whose age is under 18 can also open an account.
But his/her parents will handle the account till the age of 18.
But you can’t open a joint account as well only one account will be allowed to open against one PAN card. NRI also can’t open the account.
But if he/she opened the account when he/she was an Indian citizen then he/she can continue with that account. But can’t open a new account.
9.Negative side of investing in PPF (What is the Public Provident Fund )–
We think there is no negative side to this scheme. But if your goal is a short-term goal then maybe it is not for you.
Because it is a scheme of 15 years.
So you need to keep patience. But if you are planning for retirement or you have a long-term goal then this can be a very good option for you.
10.Should you invest or not.? ( What is the Public Provident Fund )–
As we discussed before if you have a long-term goal and you don’t want any risk on that as well as you want to get tax benefit then you should go with this fund.
Like if you are in a high tax bracket then this scheme is very good for you. And also who want a risk-free scheme that is better than FD, can invest here.
Also if you don’t want to take a risk like NPS then can go with this fund.
A bonus tip–
If you choose a monthly investment plan in this scheme then you should invest the money within 5 of that month.
Otherwise, if you invest it after 5 then your money will not earn any interest for the rest of the month.
If you are investing the money on the 6th of the month then that money will not earn interest till the 30th or 31st of that month.
It will earn interest from the 1st of the next month. So you will not get any interest for the 25 or 26 days.
That’s why you should invest it within 5 of the month. This can be a small thing to you. But if you calculate it for 15 years then it must be a good amount.
1.Can I have 2 PPF accounts?
No, you can’t have. You can open only one PPF account against one PAN number.
If you want to invest in 2 PPF accounts then open another account by the name of anybody else present in your house.
2.Can I withdraw PPF after 5 years?
Yes, you can withdraw but that is a very rare case. Read the article carefully to know more.
3.Which is better for PPF bank or post office?
It is up to you. You need to check which one is convenient for you. Choose according to that.
4.Can I increase PPF amount?
You can increase the PPF amount. But can get all the benefits of PPF to the maximum amount of 1.5 lac per annum.
You can invest above that but you can’t get the benefit on the amount above 1.5 lac.
5.How to withdraw PPF?
After completing 15 years you can withdraw your amount through net banking or mobile banking or you can visit the bank/post office to withdraw the amount.
If you have any other questions on this topic then you can comment below.