PPF account: Public Provident Fund (PPF) is a well-liked long-term financial savings scheme in India. At current, it gives a 7.1% rate of interest efficient 1 April 2023. Like each different financial savings scheme, PPF additionally has some disadvantages that it’s best to think about earlier than investing.
Prime 5 causes to not spend money on PPF
1)Decrease than the EPF rate of interest
The PPF rate of interest is decrease than the Worker Provident Fund (EPF) rate of interest, making it much less enticing for salaried workers who can allocate greater quantities in direction of EPF by Voluntary Provident Fund (VPF) for higher returns and tax advantages. The present EPF charge is 8.15% whereas the present PPF charge is 7.1%. Many salaried individuals use PPF to cut back their taxable earnings. Vinit Khandare, CEO & Founder, MyFundBazaar advised that salaried individuals can get hold of comparable tax advantages and better curiosity by designating bigger sums to Provident Fund by VPF somewhat than investing in PPF.
2) Lengthy lock-in interval
It takes 15 years for the PPF account to mature. Individuals who truly want to make investments for a really very long time are higher suited to this technique. Amit Gupta, MD, SAG Infotech mentioned PPF’s lengthy lock-in interval of 15 years, makes it unsuitable for short-term wants. “Buyers may need to think about different options if they’ve any fast wants,” mentioned Khandare.
3) Fastened most deposit restrict
Essentially the most you’ll be able to put right into a PPF account is ready at Rs. 1.5 lakh. For the previous few years, the federal government has not raised this restriction. As per Khandare, for paid staff who need to make investments extra money, the VPF is a preferable various as a result of as much as ₹2.5 lakh might be deducted from earnings with out incurring any further tax legal responsibility
“The fastened most deposit restrict which has not been elevated for a number of years, limits the funding potential for many who want to make investments greater quantities,” mentioned Amit Gupta.
4) Strict early withdrawal guidelines
Untimely withdrawal from the PPF has strict circumstances and is restricted to at least one withdrawal per monetary 12 months after 5 years, excluding the 12 months of account opening. Untimely closure is allowed solely after 5 years, topic to particular circumstances and a 1% curiosity deduction. Amit Gupta mentioned that account holders can maintain the account alive by depositing ₹500 yearly if they do not want to proceed investing.
5) Early untimely closure not allowed
In accordance with PPF laws, early closure is permitted below the next circumstances:
1)The account holder, their partner, or their dependent youngsters have a life-threatening sickness.
2)The account holder’s or their dependent youngsters’s greater schooling.
3) The account holder’s change in residency standing
Moreover, within the occasion of an early closure, 1% curiosity can be taken from the date of account opening. As a substitute of requesting an early closure, PPF account holders who don’t need to proceed investing within the plan can maintain it open by making a deposit of ₹500 every fiscal 12 months, defined Khandare.
Nevertheless, PPF continues to be one of many biggest funding and tax-saving plans for many who usually are not paid a wage.
Disclaimer: The views and suggestions made above are these of particular person analysts, and never of Mint. We advise buyers to verify with licensed specialists earlier than taking any funding choices.