Public Provident Fund (PPF) is a government-backed little saving scheme run below the Ministry of Communications. The reputation of this investment alternative is due to the fact of its tax advantage, along with the minimum investment quantity. Experts say this scheme can be looked at for normal deposits.
PPF provides assured/assured returns just about every year, having said that, the precise figure fluctuates. PPF is at the moment supplying 7.1 per cent interest, and it is revised just about every quarter by the government. The catch right here with this investment alternative is that one can only invest Rs 1.5 lakh in PPF in a year.
Experts say even although the yearly investment quantity is restricted to only Rs 1.5 lakh, PPF is amongst the protected fixed-revenue items. For conservative investors, it is an perfect alternative due to the fixed price of return and predictability in the gains in PPF. Investing in PPF is advised by monetary authorities as the maturity quantity of PPF and the general interest earned through the period of investment are tax-totally free.
Along with all the benefits of PPF, there are undoubtedly some drawbacks that need to not be overlooked. For instance, PPF is a extended-term investment, you will not be in a position to get access to the income prior to 15 years from the date of investment, as PPF comes with a maturity period of 15 years. However, if an investor desires to continue their PPF investment immediately after the maturity period can do so for a block of 5 years and so on. An investor can also hold their PPF account active even immediately after maturity, with out generating any fresh contributions. The PPF account continues to earn tax-totally free interest immediately after maturity.
Another significant drawback of this investment avenue is its fixed return. In the case of higher inflation in the economy, market authorities say returns from this investment avenue will not be in a position to safeguard one’s invested wealth.
Although PPF typically provides a steady price of interest, authorities say marketplace-linked instruments like stocks and MFs are recognized to provide greater returns. For threat-taking investors, authorities recommend one could think about investing in equity-linked investments such as stocks and equity-oriented MFs, for improved returns. Note that, these investments carry greater dangers and, therefore, demand cautious consideration, and threat tolerance levels.