PPF- Serving India through Decades

The Pubic Provident Fund (PPF) is one of the most popular schemes among Indian salaried & business class people. Public Provident Fund, popularly known as PPF, is a savings cum tax saving instrument. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them. The product has been darling of Indian middle class investors from quite some time. The selling point of the product is its security: Being a government-guaranteed scheme, the investor’s money is completely secure in this product. The benefits of PPF are two-fold. Not only it enables the investor to save tax on the invested capital, but also the interest income from the scheme is tax-free.

•          Indians rely on PPF to achieve their long term goals.   The money received after the maturity of the product is generally used by the people to accomplish the goals they aspire for. In a span of 15 years people go through a lot of hardships to save a certain amount of money for their PPF account. This wealth, built over period of time, can serve multiple purposes such as catering to the education of children, retirement and even medical emergencies.
•       For instance, Mr. A saves about Rs.1 lakh/ annum in the PPF account. Considering the present rate of interest offered by the trust, which is 8.8%, if Mr. A deposits 1 lakh/annum for 15 years without withdrawing the money in this span, he will end up  with close to 31 lakhs after 15 years. The effective yield comes out to be 15%, which is able to beat the inflation in the longer run.

·           A Public Provident Fund (PPF) account is the most tax efficient vehicle launched by government of India. Not only can the investors reap the benefit of tax saving, but also considerable capital is built over a period of 15 years. An investment of 1 lakh rupees per annum turns out close to 39 lakhs after a time frame of 15 years. The product has been a cynosure of the eyes of Indian investors since quite some time. There is tremendous feeling of likeability for the product as far as the middle class population of the country is concerned
·         The products also allows the investors to withdraw the money after the sixth year, but it cannot exceed 50% of the balance at the end of fourth year, or the immediate preceding year, whichever is lower. The interest rate for the loan is charged at 2% till 36 months, and 6% for longer tenures. Till a loan is repaid, an investor cannot take more loans. Thus, the product serves as a cushion to investors by allowing them to withdraw money from their account which investors can avail of during exigencies.

Conclusion:

A Public Provident Fund (PPF) account is the most tax efficient vehicle launched by government of India. Not only can the investors reap the benefit of tax saving, but also considerable capital is built over a period of 15 years. An investment of 1 lakh rupees per annum turns out close to 39 lakhs after a time frame of 15 years. The product has been a cynosure of the eyes of Indian investors since quite some time. There is tremendous feeling of likeability for the product as far as the middle class population of the country is concerned. Indians investors have witnessed the year 2008 stock markets crash, where all the major Indian indices were at an all time low. This wiped off a huge savings of the people. PPF as a financial instrument provides aversion to such kinds of risks. It also provides the investors a vehicle to park their hard earned funds without any fears. The researcher is of the opinion that PPF will continue to bask in glory as one of the most preferred financial products for the Indian investors.