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Public Provident Fund - How to Get Maximum Returns With Low Risk?

ppf account interest rate

You may have heard of the Public Provident Fund (PPF) scheme, but are not sure if it is worth investing in.

Here is a quick look at the benefits of the PPF scheme so you can make an informed decision:

What Is a Public Provident Fund (PPF) and How it Works?

A Public Provident Fund (PPF) is an excellent investment option for those who are looking for maximum returns with low risk. It is a long-term savings scheme that offers tax-free returns, making it a great way to save for your retirement.

The best part about a PPF is that your money is locked in for a fixed period of time, so you don't have to worry about it being invested in volatile markets. This also makes it a very low-risk investment option.

The PPF is a long-term savings scheme that offers a guaranteed return on your investment. The interest rate is currently 7.1%

The money you invest in the PPF is locked in for a period of 15 years, but you can withdraw it after 10 years.

The best part about the PPF scheme is that your money is safe and you cannot lose it. So if you are looking for a safe and profitable investment option, the PPF scheme is a good choice.

So if you're looking for a safe and reliable way to save for your future, a PPF is a great option to consider.

Tax Benefits of Investing in PPF

When it comes to saving for the future, a Public Provident Fund (PPF) is one of the best options around. It offers a high rate of interest, is backed by the government, and offers tax benefits.

What's not to love? Let's take a closer look at some of the benefits of a PPF:

  1. A PPF offers a high rate of interest, which can help your money grow at a faster pace.
  2. The investment is backed by the government, so you can be assured of safety and stability.
  3. You can claim tax benefits on the investment, which can help reduce your taxable income.

How to Calculate Returns on PPF Investments

So how do you calculate the returns on your PPF investments? It's fairly simple, and can be done in just a few steps.

  • First, find out the PPF interest rate. This rate is usually announced by the government every year, and varies depending on the economic conditions at the time.
  • Next, find out your account balance. This is the total amount you have invested in your PPF account, plus any interest that has accrued over time.
  • Finally, divide your account balance by the number of years you have left until your investment matures. This will give you your Annualized Return.
  • Here's a PPF calculator, through which you can get a idea of  your investment rate easily in simple steps.

Rules and Regulations of Investing in PPF

If you're considering investing in a Public Provident Fund, you'll need to understand the rules and regulations surrounding the process. 

  • You can only open one PPF account and you must use it for one person it can't be used for joint investments. 
  • The amount of each deposit must be between Rs 500 and Rs 1.5 lakh and your total yearly deposits cannot exceed Rs 1.5 lakh.
  • It's also important to note that withdrawals from your PPF account are limited to once per financial year after the completion of five years from the start of your account. So make sure you plan ahead when making any withdrawals! 
  • Investment in PPF is attractive as there is no tax liability on the amount withdrawn or interest earned on deposits made in this scheme.

Risk Factors to Consider When Investing in a PPF

When investing in a Public Provident Fund, it is important to consider the risk factors involved. Generally speaking, PPFs are a low-risk investment option with attractive returns. As such, the risk of losing your principal investment is minimal. However, there are certain investment-specific risks that you should consider before you get started.

  • It's important to bear in mind that the rate of return on PPF investments is subject to changes by the Government of India from time to time. 
  • You should also be aware that since PPFs are long-term investments and lock your money away for 15 years, any unexpected events could cause a financial crisis in which you would need access to your money sooner than expected. 
  • Premature closure of the account is allowed only 5 years after opening of the account except under life threatening situations.
    • Life threatening disease
    • Children's higher education
    • If you plan to move abroad

How to Get Maximum Returns from PPF?

Now we want to get into the details of how to maximize returns while reducing risk when investing in a PPF. The best way to start is by understanding the power of compounding returns. 

  • When you invest in a PPF, you can maximize returns by allowing your investments to compound over time - meaning that the returns on your investments are reinvested and added to your original capital. This is a great way to make your money grow without having to take on much risk as long as you make sure not to withdraw any funds before the maturity date.
  • If you start early, you can extend after 15 years for another 5 years. Use the power of compounding by giving enough time to grow.
  • If you're planning to invest as lumpsum pay the installment before March of the year.
  • If you're paying the installments monthly, try to pay each month before 5th day. As the interest is calculated every month on 5th day.
  • Lastly, even if you're making lumpsum contribution, you can pay monthly small contributions, which will help you to yield more returns.
  • Try to generate a second source of income in your free time and invest in PPF. Even, a small amount of Rs. 2000 per month will make huge difference in your returns.

Conclusion

A public provident fund is a great way to save money while earning a good interest rate. You can contribute a fixed sum of money to the fund every year and the government will guarantee your investment. This is a low-risk investment that can provide you with a high rate of return.

FAQs

Q. How much will I get in PPF after 15 years?

Now you might be wondering, how much will you get in return after 15 years of parking your money in a PPF account? Well, to put it simply, you can expect to get a lot!

Find your investment value easily with this PPF calculator.

The amount of interest earned on PPF is compounded annually and, at the end of 15 years, can be quite substantial. The exact amount is based on a range of factors such as the amount you've invested and the current rate of interest. Generally speaking though, your returns can be expected to exceed most other low-risk investments by a large margin. Plus, the returns from PPF are tax free - so even more reason to consider this popular choice!

Q. Is PPF better or FD?

Well, both have their advantages and disadvantages. FDs are great for stability and guaranteed returns, but tend to be less tax-efficient. On the other hand, PPFs offer flexibility in terms of investment and don't require a lot of money upfront.

Ultimately, it depends on your individual needs and preferences. If you're looking for an investment that's low-risk and will need immediate cash in a short time, then fixed deposit is probably the best option. However, if you prioritize tax-efficiency and can give some time to grow your investments, PPF is your ultimate option.

Q. Is PPF available for 5 years?

No! PPF have a minimum duration of 15 years. Once you invest in it, withdrawing your money before the completion of tenure is not allowed. There are premature closure rules, however. For instance, if there's an unfortunate circumstance such as the death of the investor or if there's a critical illness, then the amount can be withdrawn prematurely. This will subject you to some taxes depending on how long the amount has been held in your account.

On the other hand, you can opt for post office 5 years RD scheme, but it is subject to tax.

Q. What is PPF current interest rate?

The current PPF interest rate is 7.1% p.a., and it's revised every quarter by the government. This means that you can earn high returns with low risk, because you're investing in a government-regulated scheme.

The PPF also offers tax-free returns, which makes it even more attractive to investors looking to maximize their returns without taking on unnecessary risks. So if you're looking for a predictable source of income and capital appreciation, the Public Provident Fund is definitely worth considering as part of your investment portfolio.

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