PPF Investment: 6 Common Mistakes That Can Turn Your Safe Savings into a Loss

When it comes to safe and tax-saving investments, the Public Provident Fund (PPF) is often the first choice. It is very popular among salaried people and small investors because of the government guarantee, tax-free interest, and no tax on maturity (EEE status).

But have you ever looked at the other side of the coin? Like every investment, PPF also has some drawbacks that people often ignore. Investing in PPF only by looking at the benefits can become a loss for you in the long run. That is why it is important to know these drawbacks before locking your hard-earned money for 15 years.

The Biggest Drawback: Long Lock-In Period of 15 Years

It is true that you can build a large fund through PPF in the long term, but the lock-in period of 15 years is its biggest drawback. Your money remains locked for the full 15 years, and you cannot close the account before maturity (except in special cases). In today’s fast-changing times, 15 years is a long period. Your financial goals may change, or you may face an emergency, making this rule a big hurdle.

Low Liquidity and Strict Withdrawal Rules

PPF offers loan and partial withdrawal options, but the rules are strict. You can take a loan only from the third year to the end of the sixth year, and the amount can be a maximum of 25% of the balance in your account. For partial withdrawal, you can withdraw money only from the seventh year, and even then, you can take out only 50% of the balance at the end of the fourth financial year before the withdrawal year or 50% of the previous financial year’s balance, whichever is less.

Interest Rate Can Change Anytime

Unlike FDs, PPF interest rates are reviewed every quarter. In the past, rates have dropped from 12% to 7.1%. If they fall further, your returns will also reduce.

Weak in Beating Inflation

Even though PPF is safe, it may not help you grow wealth in the long run. If PPF gives 7% returns and inflation is 6%, your real return is just 1%. Investments like ELSS or good mutual funds can give much better returns.

Investment Limit and No Joint Account

You can invest only up to ₹1.5 lakh per year in PPF. This is low for high earners aiming to build a big fund. Also, there is no option for a joint account, though you can add a nominee. One person can have only one PPF account.