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My Favourite duty- Saving Investment

My Favourite duty- Saving Investment

A quick disclaimer to begin. My favourite duty- saving investment doesn’t have to be your favourite duty- saving investment and we can always agree to differ. We bandied “ effects to consider before investing in a duty- saving product ” in an earlier post. The post is a good manual on how to suppose about your duty- saving choices.

My favored duty- saving instrument is PPF( Public Provident Fund). And for me, PPF isn’t just a duty- saving product. I would invest in PPF indeed without Section 80C duty benefit. And then are a many reasons for my preference.

1 PPF Is the Closest I Get to Earning duty-Free and threat-Free Interest

I do n’t have an EPF( Hand Provident Fund) account. therefore, PPF is the only product that offers me duty-free and threat-free interest. By the way, I don’t mean that EPF is a superior product to PPF. Yes, EPF offers a advanced rate of interest than PPF.

still, indeed if you have an EPF account, you must consider PPF. Why?

Does n’t EPF offer a advanced rate of interest than PPF? Yes, it does but an EPF has its own set of limitations. EPF ca n’t be continued beyond withdrawal. You may not take out plutocrat from the EPF account and the account will continue to earn interest. still, once you stop contributing to your EPF account for over 3 times, the EPF account becomes inoperative and the interest earned on the EPF balance becomes taxable.

Note that your benefactions to the EPF account may not stop only because of withdrawal. You may move abroad for work or your new employer in India may not offer EPF.

No similar problems with PPF. Yes, NRIs ca n’t extend PPF accounts. piecemeal from that limitation, there are no similar complications with PPF.

A PPF account can be continued for life.

2 PPF Offers a veritably Good Rate of Return for a Fixed Income Product

PPF isn’t a request- linked product. The Government announces the rate of interest every quarter. Due to political forces, the interest rate is generally high.

The guidance for PPF interest rate is0.25 percent over the 10- time Government Bond yield. still, the Government is reticent to reduce PPF interest rates indeed when the Government Bond yields go down. Then’s an illustration.

3 You Can Only Invest Rs1.5 Lacs per annum

thus, if you do n’t invest in this time, the occasion is goneforever.However, you can not make up for it in the coming fiscal time, If you do n’t invest this time in PPF for any reason. Differ this with other duty- saving products similar as ELSS or duty- saving fixed deposits. You can invest Rs 10 lacs or indeed more in an ELSS fund in a fiscal time. There’s no upper limit on investment. For me, this is a good enough reason to NOT miss out on PPF share every time.

In fact, if your cash overflows and asset allocation rules permit, you can consider maximising PPF investments for your family members too( indeed though you may not get any duty benefit for it). The limit of Rs1.5 lacs per fiscal time is per grown-up.

So, if you have a family of 4( tone, partner and 2 minor kiddies), you can invest a outside of Rs 3 lacs in PPF in a fiscal time. Rs1.5 lacs in your account and Rs1.5 lacs in your partner’s account.

You must also open a PPF account for your kiddies. still, a minor’s PPF account must have a guardian. The limit of Rs1.5 lacs applies to accretive donation to your PPF account and to those PPF accounts where you’re the guardian.

Let’s assume you’re the guardian in your minor son’s PPF account. And you invest Rs 1 lac in your PPF account in the first week of April. For the remainder of the fiscal time, you can not put further than Rs 50K cumulatively in your and your son’s PPF account. redundant donation above Rs1.5 lacs in a fiscal time doesn’t earn any interest. You might ask how the Government will know about benefactions to your minor kiddies ’ accounts. Well, with technology, anticipate that to be.
Once your child becomes major( attains 18 times of age), her account shall count as a separate adult PPF account and you’ll be suitable to invest an fresh Rs1.5 lacs per time for the family.

4 PPF Becomes veritably Flexible after original Maturity of 15 Times

You ca n’t take plutocrat fluently from the PPF account until the account completes 15 times. That’s a reason why numerous investors do n’t prefer PPF. I concede that’s a debit.

still, once the PPF account completes 15 times, it becomes extremely flexible. You can extend the PPF account with or without donation.

still, you can withdraw up to 60 of the balance at the time of extension over the coming 5 times, If you extend the account WITH donation. Only one fresh restriction is that you can withdraw only formerly every time.

Indeed if you extend the account WITHOUT donation( this is the dereliction option), your PPF account continues to earn duty-free interest. No restriction piecemeal from one pullout per fiscal time. No limit of pullout quantum. You can withdraw the entire PPF balance.

Affiliated Reading Taking a Loan against PPF Account
still, PPF can work as an excellent pension product during your withdrawal, If used dashingly.

So, the below aspects make PPF my favored choice of duty- saving.

What about you? What’s your favourite duty- saving product and why? Do let us know in the commentary section.

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