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Why To Invest In PPF (Public Provident Fund)?

Mr. C.S. Sudheer | Posted On Tuesday, October 18,2016, 07:44 PM

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Why To Invest In PPF (Public Provident Fund)?



Safety….Safety….Safety….This is all you want, for your investment. You just don’t want to lose your hard earned money. In these hard times, a great saying comes to mind.

“If you do not know how to care for money, money will stay away from you.”

                                                                                                                                        -     Robert Kiyosaki

Now an excellent investment comes your way. It’s called the public provident fund, popularly known as PPF. You can invest your hard earned money in the PPF. This is an excellent investment for the long term.

The good news:

  • PPF earns you returns above inflation, over the long term.
  • An excellent tool to invest for retirement.
  • Tax benefits are simply the best, compared to most other financial instruments in India.


 But you want your investment to be safe? You cannot lose money….Right. There’s more good news. PPF is a very safe investment. It is backed by the Government of India. What more can you want? You also get good interest, which is higher than inflation and certainly more than a fixed deposit. Want to use PPF as an investment for retirement? has built its proprietary financial education platform called “Wealth Doctor” though which it offers financial education to people. Just leave a missed call on financial education helpline 02261816111 or just post a request on website. 

 What is PPF?

 Public Provident Fund also called PPF, is a very popular long term investment in India. It is backed by the Government of India.

  • You can open your PPF account, at any Nationalized Authorized Bank, or even the Post Office.
  • You can invest a minimum of just INR 500, in a financial year, in the PPF. The maximum amount you can invest is INR 1.5 Lakhs, in a financial year.
  • The PPF has a compulsory lock-in of 15 years. You cannot touch your investment for 15 years. This forces you to become a long term investor and earn returns above inflation.
  • You cannot lose the money (principal), you have invested in the PPF. You also earn interest on the PPF, which has been fixed at 8% for the October to December quarter.

Why to invest in PPF?

PPF gives returns above inflation

The interest rate on the PPF, has been fixed at 8% for the quarter, October to December 2016. This is the lowest interest rate, in the past 40 years. Yet, PPF remains an excellent tool to invest. PPF gives a return, which is about 3% above RBI’s inflation target for March 2017, which is set at 5%. A return above inflation makes it an excellent long term investment for conservative investors, who are investing for retirement.

PPF gives you tax benefits

PPF enjoys EEE benefits. What does this mean? You get a tax deduction under Section 80 C of the income tax act, up to INR 1.5 Lakhs a year, on your investment in the PPF. The amount which accumulates (grows with time) and is withdrawn at maturity, is tax free. This is the EEE benefit.

Compare this with the fixed deposit. The interest rates offered by most banks on FD’s, are 7-7.5% a year. This is lesser than the 8% a quarter, offered by the PPF. When it comes to tax benefits, PPF is on par with ELSS and EPF. Fixed Deposit tax benefits, are nowhere close.

Avail loan against PPF

You need money in a hurry. You are left with no option, but to avail a loan. You rush to grab, what is famously called the emergency loan, better known as the personal loan. Personal loan is an unsecured loan (loan without collateral), which charges you interest around 16-22% a year. This is a very high rate of interest. Why not avail a loan against PPF? You can avail a loan against money in your PPF account, from the 3rd year to the 6th year. You are charged, an interest of around 2% more than the interest rate, you earn on the PPF. This is a secured loan (loan against PPF). You can call this your cheap personal loan.

Yes…PPF is a financial instrument, which gives you more than you can wish for. Safety of your investment….Tax benefits…loans against it….returns which beat inflation, the list is endless. So just invest in this great financial instrument, and watch your money grow, as you save for retirement.

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