Between all this conversation and hoopla about mutual funds, I almost forgot the great and mighty profitable Public Provident Fund and opening a PPF A/c in India is a very good option for investors seeking long term risk free & tax efficient returns.
Why Its Profitable:
1. Investments into PPF are eligible for deductions under 80c of the IT act
2. Interest earned is EXEMPT from tax.
3. Maturity amount is also EXEMPT from tax.
Why Its Great:
1. A PPF A/c can act as a superb asset allocation tool, provided you use it effectively. Including it in your investment portfolio can take care of your debt side of the portfolio and bring in the much required stability.
2. PPF A/c can act as a pension fund, where you can withdraw the interest part(in a matured PPF A/c)yearly once and then utilize it for the full year. For example if a PPF account has 1 crore into it, and lets say the interest is 8% (just an example). You can withdraw 5 lacs out of the account and the remaining 95 lacs will continue to earn 8% interest.
3. Besides this, new investors especially those who have just started their careers can also begin their investment journey with a PPF account, its one one of the best products out there which depicts the power of compounding in the most efficient manner.
What else?
If you compare PPF with a traditional(boring) Bank Fixed Deposit then, PPF fares a lot better in the long run.
Other Helpful Tips:
A PPF account matures in 15 years. Though you are allowed to open only one PPF account, you can extend it after it matures. Accounts can be extended in blocks of five years indefinitely. Even if you don't have a large sum to invest in the PPF, don't forget to invest the minimum Rs 500 in a financial year. There's a small but troublesome penalty of Rs 50 levied if you fail to do so. Don't invest more than the Rs 1,00,000 a year. The excess amount, even if credited to your account by mistake, will not earn any interest.
A PPF account is something that every Indian investor should go for, no matter what contribution he/she begins with. It is a very effective and useful product to discipline our savings into future wealth
Ninad Kamat
CERTIFIED FINANCIAL PLANNERCM
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What a coincidence, was just planning to re-start investing in PPF for tax-saving from this year as the post tax returns are spectacular! Also planning to open a PPF account for my wife in ICICI bank
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