PPF account: Public Provident Fund (PPF) is a popular long-term savings scheme in India. At present, it offers a 7.1% interest rate effective 1 April 2023. Like every other savings scheme, PPF also has some disadvantages that you should consider before investing.
Top 5 reasons not to invest in PPF
1)Lower than the EPF interest rate
The PPF interest rate is lower than the Employee Provident Fund (EPF) interest rate, making it less attractive for salaried employees who can allocate higher amounts towards EPF through Voluntary Provident Fund (VPF) for better returns and tax benefits. The current EPF rate is 8.15% while the current PPF rate is 7.1%. Many salaried people use PPF to reduce their taxable income. Vinit Khandare, CEO & Founder, MyFundBazaar suggested that salaried persons can obtain comparable tax benefits and higher interest by designating larger sums to Provident Fund through VPF rather than investing in PPF.
2) Long lock-in period
It takes 15 years for the PPF account to mature. People who actually wish to invest for a very long time are better suited for this strategy. Amit Gupta, MD, SAG Infotech said PPF’s long lock-in period of 15 years, makes it unsuitable for short-term needs. “Investors might have to consider other solutions if they have any immediate needs,” 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,” said Amit Gupta… Read More
Source By: livemint
