PPF account: Public Provident Fund (PPF) is a popular long-term monetary financial savings scheme in India. At present, it provides a 7.1% fee of curiosity environment friendly 1 April 2023. Like every completely different monetary financial savings scheme, PPF moreover has some disadvantages that it’s essential to take into consideration sooner than investing.
Top 5 causes to not put cash into PPF1)Lower than the EPF fee of curiosity
The PPF fee of curiosity is lower than the Employee Provident Fund (EPF) fee of curiosity, making it a lot much less engaging for salaried employees who can allocate better portions within the course of EPF by the use of Voluntary Provident Fund (VPF) for larger returns and tax benefits. The current EPF worth is 8.15% whereas the current PPF worth is 7.1%. Many salaried people use PPF to chop again their taxable income. Vinit Khandare, CEO & Founder, MyFundBazaar instructed that salaried people can obtain comparable tax benefits and higher curiosity by designating greater sums to Provident Fund by the use of VPF fairly than investing in PPF.
2) Long lock-in interval
It takes 15 years for the PPF account to mature. People who really need to make investments for a extremely very very long time are larger fitted to this system. Amit Gupta, MD, SAG Infotech acknowledged PPF’s prolonged lock-in interval of 15 years, makes it unsuitable for short-term desires. “Investors would possibly want to consider completely different choices in the event that they’ve any instantaneous desires,” said Khandare.
3) Fixed maximum deposit limit
The most you can put into a PPF account is set at Rs. 1.5 lakh. For the past few years, the government has not raised this restriction. As per Khandare, for paid workers who want to invest more money, the VPF is a preferable alternative because up to ₹2.5 lakh can be deducted from income without incurring any additional tax liability
“The fixed maximum deposit limit which has not been increased for several years, limits the investment potential for those who wish to invest higher amounts,” acknowledged Amit Gupta.
4) Strict early withdrawal tips
Premature withdrawal from the PPF has strict circumstances and is restricted to at the least one withdrawal per financial yr after 5 years, excluding the yr of account opening. Premature closure is allowed solely after 5 years, matter to explicit circumstances and a 1% curiosity deduction. Amit Gupta acknowledged that account holders can preserve the account alive by depositing ₹500 yearly if they don’t need to proceed investing.
5) Early premature closure not allowed
According to PPF guidelines, early closure is permitted beneath the subsequent circumstances:
1)The account holder, their accomplice, or their dependent children have a life-threatening illness.
2)The account holder’s or their dependent children’s better coaching.
3) The account holder’s change in residency standing
Additionally, inside the event of an early closure, 1% curiosity will possible be taken from the date of account opening. Instead of requesting an early closure, PPF account holders who do not want to proceed investing inside the plan can preserve it open by making a deposit of ₹500 each fiscal yr, outlined Khandare.
However, PPF continues to be one in all many greatest funding and tax-saving plans for people who’re normally not paid a wage.
Disclaimer: The views and proposals made above are these of explicit particular person analysts, and by no means of Mint. We advise merchants to look at with licensed specialists sooner than taking any funding decisions.
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