Link your PPF Account with your Savings Account

Public Provident Fund (PPF) started as a way to mobilise investments from small investors and at the same time provide tax benefits has become one of the favourite investment options for many investors.  It is because as government manages PPF i.e. it comes with sovereign guarantee and the returns are tax-free. Government fixes the PPF interest rate and is updated on a quarterly basis. The interest rates for the 4^th quarter of FY2018-19 is 8.00% unchanged from last quarter.

With the interest rates on traditional deposits going south, PPF has emerged as a viable saving for risk averse individuals to fulfill long-term financial goals such as building a retirement fund or saving for children’s higher education.

Provident fund comes with a lock-in period of 15 years and you can withdraw the full amount after its maturity period. You can extend the maturity period in blocks of five years. Also, you can partially redeem your investments from the start of the seventh financial year.

Many banks offer provident fund and hence you can invest in PPF directly through online banking. You don’t need to have a savings account with a particular bank to invest in PPF offered by the bank. It is to be noted that while the interest rates on savings account is determined by the banks, government decides the interest rate on PPF. However, it is important to link your PPF account with your savings bank account. You just need to give a standing instruction to your bank to link your PPF account with your savings account.

Here’s why you should link your PPF account with your savings account: 

• Transfer funds online: Once you link your PPF account to savings account, you can directly transfer the investment amount to your PPF account from your savings account. So, you don’t have to add your bank details every time you invest. This will help you to invest every month and as a result, you do not have to wait for the financial year-end to invest in PPF. You can easily divide the total investment amount that you need to invest in PPF for a financial year into 12 easy instalments.
• Faster disbursal: Linking your PPF account with savings account also gives you the advantage of faster disbursal of the redeemed amount to your savings account. You can use the accumulated amount to take care of expenses after retirement. All you need to do is transfer a specific sum of money from your PPF account to your savings account. However, you can withdraw from your PPF account only once in a financial year.
• Emergencies: Emergencies come unannounced. While it is advised to save 3-6 months of expenses in a liquid fund for emergency purposes, it may fall short at many times. This is when other saving avenues come into the picture. As provident fund gives you the benefit of partial withdrawal, you can utilise a portion of your invested amount to tide over the emergencies. Linking your PPF account to the savings account will save you from the last minute hassle of transferring funds from your PPF account to your bank account.

Provident fund is a better alternative investment option for risk averse investors. By taking one more additional step of linking your PPF account to savings account, you can easily reap the full benefits of your PPF account.

 

Related articles:

• Comparative Analysis of EPF and PPF
• Employee Provident Fund (EPF)