Small Investors in India: Reasons to open a PPF Account

Since last two decades Indian economy has been changing rapidly. The risk is being increasing but the rate of interest and return are decreasing. Under such circumstances this article is attempting to show a way to steady return on small investment in long-run.

Smart investments need diversification. If building wealth is your key goal, then you must strike the right balance between risk and returns. Public Provident Fund (PPF) is one of the most attractive investment products available.

Here are few reasons why you must open a PPF account right now:

1. Eligibility: All Indian citizens can open a PPF account. Even if you are self-employed, you can invest in PPF. You can even open an account on behalf of a minor. NRIs cannot open a PPF account. However, if you open an account as a resident and then become an NRI, the account can be continued.

2. Investment Flexibility: You can deposit Rs 500 to Rs 1.5 lakh in your PPF account in a given financial year. You also have the flexibility to deposit the whole amount at once or in twelve installments. These installments can vary as per your convenience.

3. Long-Term Investment: There is a lock-in period of 15 years that ensures long-term investment in PPF. A  long lock-in-period makes PPF a good saving tool. After 15 years, you can extend the account in blocks of five years.

4. Interest Accumulation: The rate of interest on the deposits is fixed at the beginning of each financial year. Although the rate may vary, you will get a fixed return every year. The interest is credited to your PPF account on 31st March every year.

5. Premature Withdrawal: When the PPF account matures in 15 years, you can withdraw the entire amount. If you are in need of money before this time period, then you can withdraw partial amounts after the seventh year. This is subject to certain conditions and limits.

6. Tax Benefits: PPF investments fall under the E-E-E (exempt-exempt-exempt) tax basket. It means that your investment has tax benefits at all stages -the investment, the interest earned, and the amount withdrawn on maturity.

7. Provides Mobility: If you are moving to a new city, you can shift your PPF account to the nearest branch. You do not have to close the old one and open another in a new city.

8. Loan Requirements: Do you need security for a loan? You can use your PPF. Loans against PPF account can be availed before the seventh year.

9. Low Risk: PPF is a Government scheme. Hence, it is a low-risk investment. You are sure that your money is safe in PPF and you will earn good returns.

10. No Attachments: In the case of a debt or any liability by a PPF member, the corpus is free from any attachment by court order.

Don’t let the lock-in period hold you from investing in PPF! Think of it as a way to secure your future. PPF is perfect for those with low-risk appetiteFree Web Content, and yet need an investment option that gives good returns.

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