Verified Service Provider

Get Free Financial Advice Leave a Miss Call on 09663989120
Follow us:

Get Your Financial Expert Advice on Public Provident Fund -

Fill up the Form or Just Leave a
Missed call on

096-6398-9120

  • Advantages of Public Provident Fund
  • Risk-free investment option:
  • Partial withdrawal facilities
  • Higher interest rates
  • Disadvantages of Public Provident Fund
  • PPF Withdrawal Options
  • Cap on the upper investment
Call us Today

096-6398-9120

Facebook Twitter Linkedin

What is Public Provident Fund?

Public Provident Fund (PPF) scheme is a popular long term investment option backed by Government of India which offers safety with attractive interest rate and returns that are fully exempted from Tax. Investors can get the facilities such as loan, withdrawal and extension of account.

Advantages of Public Provident Fund

PPF is and investment product that enjoys the benefit of EEE (exempt-exempt-exempt) tax model. Under section 80c, any contributions made to the PPF are tax-exempt up to 1.5 lakh per annum. Furthermore, the maturity amount and the interest received on PPF is also exempt from tax.

PPF is a government-backed scheme and ensures risk-free returns. The rate of the PPF are not affected by the market volatility and the returns are guaranteed by the government.

PPF is a product for building retirement corpus and has a lock-in period of 15 years, which can be extended in blocks of 5 years. PPF also comes with partial withdrawal benefits, which can be done after completion of 5 years. For instance, if an account was opened on April 1st (FY 2012-2013), the amount can be withdrawn from (FY 2019-2020).

Another significant benefit of PPF is that you can avail loans against your PPF balance between the 3rd year and the 5th year. You can also take a second loan before the 6th year if the previous loan is fully repaid. You can avail loan up to 25% of the balance at the end of the second year

You can deposit any amount in your PPF account, which can be done in installments or lump sum. In a year, you can make a maximum of 12 instalments and you can start your investment with as little as Rs.100. To maximize the benefits invest before 5th of every month.

As compared to fixed deposits, PPF offers a higher interest rate. The PPF interest rates are compounded annually and are calculated on the lowest balance between the 5th day and the last day of the month. Investment above 1.5 lakhs will not earn any interest nor will not be eligible for tax savings.After the maturity of PPF account you can still enjoy PPF benefits by extending the tenure for a period of 5 years. The other option is to withdraw  the entire amount and invest in some other asset.

Disadvantages of Public Provident Fund

The Interest rate of the PPF account is depended on the savings instrument and is dependent in the market rates, and the rate of interest has been variable being linked to the market rate. Initially the interest rate offered by PPF was 12%, however it has reduced to 8% now which is even closer to the Fixed Deposit Rate provided by the banks, and the interest rate is further going down and is expected to remain at 8% or further go down as government has invested into small saving instruments which is not expected to improve in near future.

PPF has a lot of drawbacks with respect to the withdrawal of the money, and the account has lock in period of 15 years which is very huge, but although there are options for partial withdrawal and loan facility on the PPF account.Loan facility is available in the 3rd and 6th financial year but the amount for which loan is provided is 25% of the amount accumulated at the end of the 2nd financial year which is very low, and PPF subscriber also needs to apply for the loan in the 2nd year while the loan is provided in the 3rd year.There is a capping for the amount that one can withdraw in the 7th year of the accountOne can withdraw only 50% of the amount that is there at the end of the 4th year or the 50% account balance at the end of the previous year The minimum of the two amounts can be withdrawn by the person, and thus, PPF comes with a lot of limitations with respect to the withdrawal.

There is a cap on the amount that can be invested in the PPF to avail tax benefit as well as get an assured return, and the maximum amount that can be invested if only 1.5 lacs a year which can not fetch you a very high corpus at the end of the maturity period. Therefore, PPF does not provide a good option for a person who is targeting a big corpus at the end of the maturity period.

Most of the saving instruments such as Fixed Deposit and mutual funds provides a saving option in the name of multiple family members which makes them a family saving option helping in building transparency as well as trust, however, PPF does not provide that option. One can not have a joint ppf account, but the person and wife can only have their individual PPF accounts.

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.

Hindu Undivided families which earlier could open the account but now HUFs can not open the PPF account.

Get Advice From Your Financial Expert

Leave your Contact Information Below Our Financial Expert will Contact you

Get Advice From Your Financial Expert

Leave your Contact Information Below Our Financial Expert will Contact you