PPF Investment Scheme: In today’s world, everyone wants their money to be safe and also provide good returns in the future. When it comes to completely secure investments and government guarantees, the Public Provident Fund (PPF) is the first name that comes to mind. But the question is, is simply opening a PPF account and occasionally depositing money enough?
PPF is not just a simple savings scheme. With the right strategy, it can become an investment that builds a strong financial foundation in the long run. If you understand its rules and intricacies, this scheme can help you gradually build a large fund.
The Investment Date in PPF is Crucial
Most investors deposit money into their PPF account at the end of the month after receiving their salary, but this is considered the most common mistake. Interest in PPF is calculated on the minimum balance from the 5th of the month to the end of the month. This means that if the money is deposited after the 5th, you don’t get the full interest for that month. Those who invest at the beginning of the month, i.e., between the 1st and 5th, get the maximum benefit of the interest.
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Loan Facility on PPF Account
Most people believe that money can only be withdrawn from PPF after maturity. However, the truth is that a loan can be taken against the PPF balance if needed. This facility is available from the third year to the sixth year after opening the account. The interest rate on this loan is only one percent higher than the PPF interest rate, which is considered much cheaper compared to personal loans in the market.
PPF is Foremost in Terms of Security
PPF is considered one of the safest investment options because the money deposited in it is legally completely secure. Even if a person faces debt pressure or a legal dispute, no bank or court can seize the amount deposited in the PPF account. This security is not available in other investment options like mutual funds or fixed deposits.
Benefits accrue after 15 years
People often think that the investment ends as soon as the PPF (Public Provident Fund) term of 15 years is complete. However, this is actually when the real effect of compounding begins to show. After 15 years, the PPF account can be extended multiple times for periods of five years each. Continuing the investment for a longer period allows the benefit of compound interest to significantly increase the fund, making it extremely useful for retirement planning.
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PPF is excellent for children’s future
A PPF account can also be opened in a child’s name. This allows parents to gradually build a secure fund for their child’s future. By the time the child needs money for education, professional courses, or business, a substantial tax-free amount will have accumulated in the PPF account. PPF falls under the EEE category, meaning that the investment, interest, and maturity proceeds are all completely tax-free.
Important points to keep in mind
Investors who choose the old tax regime can avail of a tax deduction of up to ₹1.5 lakh on investments made in PPF under Section 80C of the Income Tax Act. Additionally, it is crucial to add a nominee to the account, as withdrawing the money in the future can become complicated without one.
Adarsh P
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