PPF or Public Provident Account is the best weapon to create a long term wealth without taking much risk in investment. In fact its a kind of zero risk investment or risk-free investment tool in India. Have you ever realized why PPF account is so unique?
In this article I will try to share some information to get maximum benefits from a PPF account. Although I have realized the fact very late and waste few years, but I am happy to see few of my colleagues are enjoying lakhs of tax-free interest every year in their PPF account. Anyway, let’s find out why PPF account is the best investment tool in India for long term wealth creation.
How To Get Maximum Benefits From a PPF account
All the points shared here are from my personal realization and experience after operating couple of year of PPF account in SBI.
Invest within first 5 days of month: If you are investing in PPF account on a monthly basis, then on which date your money is debited from your account to PPF account? Generally as per PPF interest rule, if you put the money in first 5 days of the month, your money will get the interest of the entire month. This is little different from how savings bank account interest rate is calculated.
Open PPF account in Every Members name: How many members you have in your family? Right now we are 3 people and I have opened 2 account in my name and my wife’s. I am also planning to open a PPF account for my child in coming days. The benefit is that PPF is a tool where you can put money & earn income tax free return. Not only that, after 15 years of initial lock-in period, one can extend the account with 5 year lock-in only.
Best Alternative to Bank FD after 15 years: Just now I said about this topic and here I will explain little more. E.g. If you have opened your PPF account in year 2000, then it would have been matured by now, 2016. That means, right now the lock-in period of your PPF account is just 5 years, equivalent to your tax saving Bank FDS where you will find less interest and also liable to pay TDS. So, don’t you think PPF is the best alternative to Bank FDS?
Systematic Investment Plan in PPF account: Generally PPF accounts doesn’t have online transfer facility till it was with post office only. Although many banks has started providing PPF account opening facility, but most of the don’t have online money transfer facility. But if you have PPF account in SBI, ICICI Bank, Bank of India, IDBI, IOB, Allahabad Bank you can easily create a standing instruction and invest money regularly in your PPF account. I am following the exact way.
Open PPF As Early As Possible: May be you have no plan to invest money right now, but do you ever realize what I have said in the above part of this article? PPF is a very long lock-in period investment tool and you have to deposit only Rs 500 every year to keep the account active. So your work is to open the account now and put Rs 500 so that it can pass the lock-in period year by year. Imagine after 4-5 year, you have started investment and realized to open PPF account. If you could have opened PPF account 5 year back, it would have been a 10 year lock investment only. So, think on this this point and if you have opened PPF account in your name, then think about your wife & kids.
Do you think there are other ways to maximize PPF account benefits? I would love to know more good things about this best investment product in India.