Naveen Kukreja, Co-Founder & CEO of Paisabazaar
Existing PPF depositors who don’t have any pressing need for money should lengthen their PPF A/c after the completion of the 15-year lock-in interval. Fresh contributions of as a lot as ₹1.5 lakh inside a financial yr inside the extended PPF Account would qualify for tax deduction beneath Section 80C. The curiosity income from PPF will also be tax-free and is compounded on a quarterly basis.
Moreover, being managed by the Union Ministry of Finance, PPF account comes with sovereign guarantee, the perfect sort of capital security on the market to any investor. Partial liquidity will also be supplied to the extended PPF Accounts as a result of the depositors can withdraw as a lot as 60% of the PPF steadiness (held on the time of account extension), each in a single or in yearly instalments.
Note that the extension of PPF A/c is allowed inside the block of 5 years and so forth. To lengthen their account, PPF depositors must notify and submit Form 4 to the concerned put up office or monetary establishment inside 1 yr of the account maturity.
Rajani Tandale, Product Head – Mutual Fund
When considering closing your PPF account after the 15-year lock-in interval, it is very important have a clear understanding of your financial goals and liquidity needs. If you need the money immediately for any function, harking back to a financial emergency or to fulfill any very important financial function, closing the PPF account might probably be a viable risk.
However, in case you’ll be able to afford to go away the money invested for some further time and don’t require quick entry to the funds, extending your for a block of 5 years might probably be a larger risk, as PPF continues to earn curiosity even after maturity.
PPF gives 7.1% tax free returns which is a fairly worth of return in mounted income basket, whereas monetary establishment FDs and debt mutual funds are taxed as per the tax slabs. PPF falls beneath the Exempt-Exempt-Exempt (EEE) class, which means the funding, curiosity earned, and maturity proceeds are tax-free.
It is significant to note that you’d be capable to make partial withdrawals from the account after the preliminary lock-in interval, matter to positive circumstances. Additionally, you might as effectively proceed to contribute to the account by means of the extension interval.
In summary, the selection to close or lengthen your PPF account after 15 yr of lock-in interval depends upon your financial goals and liquidity needs. If you need the money, you’ll shut the account, nonetheless in case you’ll be able to afford to go away the money invested, you’ll lengthen the account for a block of 5 years and proceed to earn curiosity.
Manu Rishi Guptha, Founder of MRG Capital, a SEBI registered Portfolio Management Company
Currently, a PPF account offers a 7.1% charge of curiosity with 15-year lock-in interval. Though the speed of curiosity supplied simply is not mounted and is prepared yearly by the Government, tax benefits supplied by the PPF investments make them a formidable funding risk amongst others. Investment, curiosity earned and redemption amount are all tax exempted in PPF investments.
The redeemed PPF amount could also be extra extended within the an identical PPF with lock in of 5 years. One one other selection is to position the redeemed amount in a tax free FD which could present greater returns than a PPF account and supply tax deduction benefits. FDs will present greater liquidity although they’ve 5 yr lock in as banks merely give credit score rating in the direction of the mounted deposits. Breaking a FD with a monetary establishment is easier than breaking an extended PPF account. So, it is steered to position the redeemed amount from a PPF account in a tax free FD supplied by an excellent monetary establishment.
Aniruddha Bose, Chief Business Officer, FinEdge
We would advise merchants in the direction of extending their PPF account after the mandated lock in interval finishes. Irrespective of your life stage, there are greater decisions on the market. If your lock in finishes near your retirement age, it’s best to ideally organize a scientific withdrawal plan from a well-planned portfolio of mutual funds, to generate a predictable income out of your collected corpus.
If you proceed to have a lot of years to go till your retirement, you could be greater off investing your PPF proceeds aggressively into equities and maximizing your wealth. After all, the PPF is admittedly not quite greater than an illiquid mounted income funding, so it doesn’t completely clear up the difficulty of income period or capital improvement! A dependable Advisor will make it easier to suggest your PPF proceeds successfully whereas balancing your assorted financial goals and priorities.
Nirav Karkera, Head of Research, Fisdom
Extending your PPF account could also be good in case you don’t require quick entry to funds, as a result of it presents a worthwhile different for fixed-income funding. The PPF scheme moreover allows you to make investments any further money by means of the 5 years and earn tax-free returns beneath the EEE standing whereas benefiting from compounding. It’s worth noting that merchants can lengthen their PPF account with or with out extra contributions for a block of 5 years.
This flexibility permits individuals to proceed incomes curiosity on their present steadiness whereas having the selection in order so as to add further funds within the occasion that they choose to take motion. Two further very important caveats is that the monetary establishment or put up office needs to be intimated regarding the intention to extend in a effectively timed methodology and only one withdrawal transaction could also be made in a single financial yr by means of the five-year extension. For merchants who don’t need the money upon maturity, extending the tenure may be a prudent different. The tax effectivity, liquidity and glued curiosity building strengthens this case for an extension.
CA Manas Chugh, expert in Investment and Taxation, Osgan Consultants
Closing of the PPF Account depends upon the Financial Goal of the person. As the velocity of curiosity on PPF is 7.10% which is quarterly reviewed, it permits the person to have positive allocation on Fixed Income funding. After 15 years, a person can lengthen for a block of 5 years with modern deposits or with out modern deposits. The extension permits an early withdrawal risk nonetheless with limits. As the lock-in interval is shortened, on account of this reality, people who’ve emergencies of cash should shut the account, in some other case, the account permits an excellent worth of curiosity and diversification of funding.
Juzer Gabajiwala- Director, Ventura Securities
In my view, funding in Public Provident Fund Account (PPF) should be a part of your Asset Allocation. Thus, it’s best to lengthen your PPF account in blocks of 5 years significantly in case you belong to 30% tax bracket and the current charge of curiosity of seven.1% p.a. stays tax free.
Additionally, PPF has the backing of the central authorities and provides mounted returns, thus making it a risk-free funding. However, in case you belong to 0% tax bracket; chances are high you will take a look at completely different mounted income merchandise which will offer you larger than 7% p.a. returns.
Atul Sharma, Founder, Lex N Tax
If you’ve got a PPF (Public Provident Fund) account and it has achieved its lock-in interval of 15 years, you’ve got two decisions: shut the account or lengthen it.
Closing the account means withdrawing the whole steadiness along with the collected curiosity. You can use the funds in your financial goals or make investments them in numerous financial units. However, in case you shut the account, you can be unable to profit from the tax benefits that embrace investing in PPF.
On the alternative hand, you’ll choose to extend the PPF account after the completion of 15 years for a block of 5 years. During this extended interval, you’ll proceed to contribute to your PPF account and earn tax-free curiosity on the stability. The most deposit amount proper right into a PPF account is Rs.1.5 lakh per financial yr.
So, whether or not or not it’s best to close or lengthen your PPF account after 15 years depends upon your financial goals and wishes. If you need the money for some urgent financial requirement, you’ll take into consideration closing the account. However, if you don’t want the money immediately, and want to proceed incomes tax-free curiosity, you’ll select to extend the account.
Maitry Shah, the founding father of LakshMe, the CSR initiative of the Prudent Group
Closing and lengthening the PPF account depends upon the effectivity of various funding merchandise in your portfolio, if any. If you’ve got completely different funding decisions that present greater returns, it would make sense to close the PPF account. On the alternative hand, in the event you want to proceed with the account and are comfortable with the speed of curiosity, chances are high you will choose to extend it. Keep in ideas that the PPF offers tax benefits beneath Section 80C of the Income Tax Act, and the curiosity earned will also be tax-free.
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