what are the pros and cons of ppf

public provident fund (ppf) is a popular investment instrument to accumulate long-term savings. it offers a steady return on your regular savings and is considered a highly safe investment form. although withdrawal from ppf is allowed after a specific duration, it is a long-term instrument that requires 15 years of regular saving. you can extend it further in blocks of five years. with ppf calculator’s help, you can easily find your ideal ppf contribution and its yield on maturity.

why invest in ppf?

• ppf has the central government’s backing, so it is a safe investment with a certain return.
• you can start a ppf investment with an amount as low as ₹ 500. you can go for regular payments or a lump sum payment. refer to a ppf return calculator to find out what investment amount can yield your targeted maturity corpus.
• you can make a partial withdrawal from your ppf account, starting with the 7th year of the investment.
• you can avail loan against your ppf accounts from the third year till the end of the sixth year. the interest rate chargeable is a minimal 1%.
• you have the flexibility of extending the ppf by blocks of five years, even after its maturity. thus, you can choose to save in ppf for all your active life.
• ppf investment offers tax benefits. the deposit made in it can be claimed as a tax deduction. the interest earned on ppf is exempt from tax. even the amount received on maturity is not subject to income tax.
• even minors can open a ppf account. ppf is also a popular saving option among homemakers as it requires no income proof for opening a ppf account.

things to consider before investing in ppf

• a major drawback of ppf is its long lock-in period of 15 years. you cannot withdraw even partially from it during the first six years.
• due to the lock-in period, you lose your liquidity by investing in ppf.
• it is not ideal for people looking to make large investments. there is a cap of ₹ 1.5 lakhs per year with an investment in ppf.
• in the case of high inflation in the economy, the ppf interest rate may not be able to protect your invested wealth.
• although it offers a steady rate of interest, market-linked instruments like mutual funds are traditionally known to provide higher returns.
• you have the option of opening ppf in an individual capacity only. joint ppf accounts cannot be opened unless in case of a minor.

a ppf account is suitable for investing a portion of your income with the vision of a long-term return. use cred’s ppf maturity calculator to find out how compound interest adds up to your fund contribution. investment should always start from risk-free options to speculative ones, and ppf is certainly one of the safest investments available.