An outstanding instrument for long-term savings is the PPF account (Public Provident Fund). The PPF account is almost a blessing for risk-averse investors, wrapped in protection and free of tax. As it is supported by the government, it is also totally secure and risk-free. PPF is particularly suitable for self-employed professionals and small businesses that are not covered by the Workers’ Provident Fund. Many who do not have access to a coordinated setup can achieve long-term objectives through PPF.
The timeline to achieve your goal will be determined based on the sum you spend monthly and the length of investment you are able to commit to. The longer you invest the capital, the more it grows. In your PPF account, you can invest a minimum of Rs. 500 to a maximum of Rs. 1, 50,000 in a financial year. You can choose to either make contributions in a lump sum or in the form of installments.
PPF can be a big part of your financial portfolio, and it requires minimal preparation. Here are a couple of tips to help you make the most of this choice:
- How Much You Should Contribute To Your PPF Account:
Aim to increase the contribution towards your PPF account every year based on your income and savings. In PPF, the tax-free interest gained is 8.7 percent. It is a much safer investment choice on a post-tax basis than other risk-free investments, such as bank FDs, where interest is taxable. The advice here is to maximize your contribution towards the PPF account, depending on your affordability.
- When Should You Make Your PPF Deposit:
The interest in your PPF account’s balance is accrued yearly, but the interest is measured weekly. So, when do you make a PPF deposit? It is the best choice to make a total annual investment early on in the financial year.
However, it is easier to invest in monthly installments if you are unable to make the full annual investment early in the year. It is important to remember that interest is measured between the 5th and the last day of the month on the lowest balance in the account when you make your deposit. But you won’t receive any interest on the deposit made in the month if you don’t make your PPF deposit by the 5th day of the same month. Therefore, you must try to make your deposit before the 5th of every month in your PPF account.
- Withdrawal From Your PPF:
As a rule, since PPF is an investment in retirement planning, you should never withdraw from your PPF account. However, you can take out a loan or withdraw partially from your PPF account if you are facing a financial crisis. As soon as you are able to, you can make sure you refill your withdrawal.
- Extend Your PPF Account Maturity:
If you do not need liquidity immediately, extending your PPF even beyond maturity is a good idea in blocks of 5 years. The PPF account is an excellent choice for a risk-free investment. As per your financial condition, you can continue making deposits to your PPF account if you can afford to. You can still invest in PPF even if you cannot make deposits every year, and your accrued balance will continue to gain tax-free interest.
Keeping the above tips in mind, you must also begin investing in a PPF account through reputable banks like Axis Bank. You can enjoy loan facilities along with partial withdrawals and view mini statements online, anywhere, according to your convenience.
So, meet your financial/life goals through a flexible PPF account!