The Public Provident Fund (PPF) is undoubtedly one of the popular and attractive savings-cum-investment schemes in India. The fact that it's mandated by the government brings, besides the guaranteed returns, an added sense of security. This scheme is ideal for an investor, who is averse to taking risks but look for long-term capital appreciation. Not to forget that PPF is the most popular among those who prefer the safety of their principal amount and have a low-risk appetite. Last, what makes it even more attractive is the fact that funds you have invested in a PPF account are not market-linked.
Here are 6 reasons how PPF is useful in the long run:
Risk-free: Backed by the government of India makes your investment in the PPF risk-free. Not to forget the returns are also guaranteed by the government. Did you know that even India's courts can't attach your PPF account funds to pay off debtors? No? Well, now you know the reason why it's considered one of the safest schemes.
Tax benefits: There are not one, not two, but three income tax exemptions on your PPF funds, the only scheme in India with such an advantage. First, the principal amount is deductible from your taxable income. There is no tax on the interest you earn on your PPF investment. Last, the amount you receive upon the maturity of your PPF investment after 15 years is also exempt from tax. The three Es (exemptions) make it an attractive option for so many investors in India.
It's for aggressive investors too: While we might have until now emphasised that it's a perfect scheme for a risk-averse investor, in no way are we suggesting that an aggressive investor can't diversify through PPF. If an aggressive investor is looking for a long-term investment, PPF is the best bet, for it gives the desired stability and optimum return in the debt portion of their portfolio.
Partial withdrawal: Once you have invested for seven years in your PPF account, you become eligible for partial withdrawals. Not just that, in case you are faced with a severe medical emergency or you want to finance your higher education, there is a provision for the premature closure of the account as well.
Loan facilities: The PPF has a lock-in period of 15 years and the account holder can extend it by another five years. But you can make also raise a loan of up to 25 per cent of the balance in your account at the end of two years before you apply for the loan. This can be done between the third and sixth year and the loan must be repaid within three years.
Flexible, easy to manage: First, you can invest as little as Rs 500 per year and as much as Rs 150,000. You can divide your investment into 12 instalments or even make the payment in a lump sum, depending on your convenience.