When constructing a stable investment portfolio, fixed-income instruments play a crucial role. Among these options, the Public Provident Fund (PPF) account stands out as a popular choice, thanks to its numerous benefits. In this article, we'll delve into the world of PPF investments and explore why it deserves a place in your portfolio.
What is PPF?
A PPF account is a government-backed long-term deposit scheme that promotes regular savings. It has a tenure of 15 years, which can be extended in blocks of 5 years if desired.
To start your PPF journey, you are required to invest in it every year. The minimum investment starts at ₹500, and the maximum is ₹1.5 lakhs. The interest rate on PPF is determined by the government every quarter and is linked to the rates on government securities, thereby adjusting accordingly.
To get a better idea of your maturity amount and yearly investment, you can use a PPF calculator.
Eligibility
Any resident Indian citizen can open a PPF account in their name. You can also open an account in the name of a minor. Remember, you can open the PPF account as an individual taxpayer and hold only one account under your name.
Also Read: [Tips to earn maximum interest on PPF]
6 benefits of investing in PPF
- Fixed returns
One of the primary reasons why PPF is popular among investors is the assurance of fixed returns. Unlike many other investment options that are subject to market fluctuations, the PPF account provides a guaranteed interest rate on your deposit. The interest rate on PPF is determined by the government every quarter and currently stands at 7.1% per annum, compounded annually.
- Affordability
PPF account is highly affordable, as you can start with a minimum deposit of ₹500. You have the flexibility to deposit this amount in a lump sum or through convenient instalments.
- Disciplined savings
Since PPF requires you to deposit annually, it teaches a disciplined savings habit. You can automate your investments by putting aside a fixed amount towards the PPF account monthly or yearly for 15 years and building a disciplined corpus. By making regular contributions to your PPF account, you are actively working towards building a corpus that can be utilised for various long-term goals like saving for retirement or children's higher studies.
- Liquidity
Although the PPF scheme is designed for long-term savings, it offers liquidity options during the investment tenure in case of a financial emergency. You can avail yourself of partial withdrawals. Once the deposit completes 6 years, you can withdraw partially for your financial needs. However, do note that you can make a maximum partial withdrawal of 50% of the account balance.
- Easy availability
Opening a PPF account is quite simple and accessible. Post offices and leading banks allow you to open a PPF account. You can open the account offline or online, whichever is faster or more convenient. For instance, Axis Bank lets you invest in its PPF account online once you log in and submit the required documentation. You can start building your dream financial portfolio from the ease of your home.
- Tax benefits
PPF investments enjoy the Exempt-Exempt-Exempt (EEE) status, offering multiple tax exemptions. Firstly, the amount invested in a PPF account qualifies for tax deduction benefits under Section 80C of the Income Tax Act. Secondly, the interest earned from a PPF account is also tax-free, providing another exemption. Lastly, the maturity proceeds of a PPF account are exempt from the capital gains tax, ensuring the third exemption. Importantly, the EEE benefit of PPF remains applicable even if partial withdrawals are made or the account is closed prematurely. In such cases as well, the proceeds from the PPF account will still be tax-free.
Summing up
Ready to secure your financial future with a disciplined approach? Open a PPF account online through Axis Bank and add a debt component to your investment portfolio. By making disciplined investments, you can create a corpus for your long-term goals while enjoying the tax benefits offered by PPF. Invest in PPF today!
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
