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 4th 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.
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.
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