Whenever we talk about retirement corpus, Employee Provident Fund and Public Provident Fund come to our mind. These schemes are meant for long-term savings and support our after retirement plans. These instruments are known to be secure & steady with guaranteed earnings. You can start with small savings and end up with significant retirement corpus!
People frequently ask: which one is better? Honestly, both schemes have their own charms. We cannot pick out randomly. Both have been introduced for specific purposes. According to the objectives, both schemes are placed in the front row.
So, Let's check out how both schemes operate differently.
Employee Provident Fund Scheme:
As the name implies, EPF scheme is specially designed for salaried persons. Both employee and employer have to contribute towards the EPF account. Precisely, the employee and employer have to make 12% of the employee's basic salary.
Employee Provident Fund Organization is the government body that monitors and operates this scheme.
Every Indian resident who is a salaried person can avail services of EPF scheme. The employee can become the member of a scheme from the date of joining the establishment. The best part, you can get the pension and insurance claims once you become eligible for EPF Scheme.
EPF: Tax Benefits
The employer's contribution is completely exempt from tax. Whereas, your contribution as an employee is subject to tax.
The withdrawals are allowed after the retirement. If you try to make the premature withdrawal before the 5 years period of opening, the interest compounded becomes taxable! That's why don't go for partial withdrawals unless you need them badly!
Public Provident Fund Scheme:
The salaried employees can get retirement benefits from EPF and pension schemes. But, for self-employed and business class individuals, nothing is better than Public Provident Fund.
With this long term investment scheme, one can start saving for retirement with a very small amount. You can deposit the minimum of Rs. 500 only. However, a deposit over Rs. 1,50,000 is not possible during a financial year.
Every Indian resident can apply for this scheme. One resident can maintain only one PPF account. Non-residents or Hindu Undivided Family persons cannot open PPF account.
PPF is a saving scheme that comes with interest plus tax benefits. You can open this account at any authorized bank or post office.
The maturity tenure of PPF account is 15 years.
EPF VS PPF: Difference
Let's check out the difference between both schemes:
In EPF, both employees and employer make the contribution towards the account.
In PPF, the account holder is the sole contributor to the account.
Salaried employees can apply for EPF.
Salaried, self-employed and business/professional persons can open the PPF account.
The maturity tenure is dependent on the employment term in the case of EPF. But, tax is applicable if you withdraw before 5 years.
For PPF, the maturity period is 15 years. Also, the maturity amount is tax free.
EPF investment is subject to tax if withdrawal is made before 5 years.
Whereas Interest earned on PPF balance is exempt from tax.
EPF vs PPF: Which Scheme Is Better?
As mentioned in beginning, every employee should select EPF scheme for building the retirement corpus. While self-employed or business class can avail PPF scheme for long term saving as retirement plan.
I feel both have their own advantages. In fact, such schemes encourage us to save money towards our retirement. So, these are anyways good for investors who wish to enjoy risk free returns.
What do you think about these 2 long term investment schemes? Any suggestions or ideas you have, feel free to share here.
@balogh03 Yes, the earlier one starts financial planning, the more amount we can accumulate. DIY approach is fine but getting professional help is also a good idea especially if you are a new investor. People are realising the importance of financial planning these days. It's great you consulted a financial expert. How was your experience and what guidance you got? A brief idea, if you can give.
@Tarun Yes, Zerodha coin has a requirement for Demat and an annual fee of something like Rs.500 only. I highly recommend not to consider the fees given their service and great product. Direct MF platforms which are not brokers are never going to be as great as big brokers like Zerodha.
Also, Having a demat gives you a holistic view of all your investments and you can track them easily.
Most of the people think insurance as the investment plan. But, it is risk coverage. It will be totally wrong to mix both of them. It is better to start investing in the best child education plan from Kotak mutual funds and plan a better future for your child.
Full Service Brokers, as the name itself suggests provide a full set of services to their clients. In simple words, full service brokers offer multiple services including personal financial advice, research reports and a relationship manager. This shall be in addition to the buying and selling of shares.
You also have access to a range of financial products like mutual funds, debt, IPO etc. A complete package of services!
Looking at the benefits of using these stock broker's services, I thought of compiling a list of the best full service brokers in India.
Best Full Service Brokers in India: List 2019
Here's a list of the major and most popular full service brokers in India:
IIFL or India Infoline
Did I miss any important name here? These are the stock broker's name that come to my mind right now.
Do you have any other important names to add to this list? If yes, do share your feedback and details on any specific full service stock broker in India. This shall help to make this stock broker list comprehensive and even more interesting. So, go ahead and share your views.
Best apps depend on the use case. If you want to just view the stock situation and check your portfolio value, Moneycontrol or ET money are good. If you want to trade as well, you might want to look at apps like Zerodha, 5paisa etc.
Who doesn't like to get rich? In fact, we all keep looking for fast and easy ways to get rich in lesser time. Of course, there's no sure shot formula to it. Unless you win a lottery ticket or gain big in stocks (that too if you are lucky enough and can take bigger risk).
So, I won't share any shortcut to becoming wealthy. These are just some useful personal finance tips, if followed can surely make you climb the ladder of success easily.
10 Personal Finance Tips to get rich:
1. Define what being rich means to you:
"Rich" is defined as having a bulk of money or assets. Also, wealthy means having plentiful or in abundance. So, firstly you need to define for your self what does rich mean for you.
How much money is plenty for you? Will learning new skills make you rich? How will health make you rich? Do think about it and spend some time on reflecting on your definition of getting rich.
2. Get into a habit of Budgeting:
The starting point of a good financial plan is a good budget. Budgeting is an exercise not just for corporations but equally important for personal finance. So, do have a clear idea of your cash flow i.e summary of incomes and expenses. This will help you prioritize expenses and cut down on expenses which do not fit your budget.
3. Add new income streams:
Most successful or rich people have multiple income streams. They are never dependent on a single income stream. So, think about adding new income streams to your income. The genuine sources which can keep on generating ongoing income for you. It can be starting an online business, selling online, guest assignments or buying an asset which creates regular income.
4. Have clear Short term and Long-term goals and Invest accordingly:
Set up clear goals for yourself both in the short term and the long term. Short term and long term goals both require different investment strategies to achieve them. Start investing early for long term goals like retirement or big house that you want to buy 10 years down the line. Remember, some asset classes outperform markets over a longer period only.
5. Have adequate Health insurance:
Health costs are going through the roof and they will keep on growing. So, if you do not have adequate health insurance it can make you poor. So, make sure you have adequate health insurance for you and your family to take care of any such issue.
6. Go out meet successful and rich people:
You are the average of people you hang out with. So, go and meet successful and rich people. Believe it, you will learn a lot. Reduce the time you spend on social networks and go meet real influential people, if you get the opportunity to do so.
7. Create a Financial Plan and track your goals:
A good financial plan is the initial point to create wealth in the long term and achieve your financial objectives. Sit with your financial planner and define your financial objectives. Set up realistic goals and keep tracking them.
8. Cut the flab:
If you start tracking your cash flows you will start getting a good idea of your expense profile. Pick up one expense (it should be a substantial one) which you want to cut from your expense profile. It might be subscription to TV channels you don't watch or the visits to fancy hotels whose food you do not enjoy any more . Identify one such expense and cut it down.
9. Read good books & Follow Interesting Blogs:
Do invest in yourself. Start reading good books and follow interesting financial blogs. They will enrich you with important information and success stories to learn from.
10. Teach your kids all of this:
Well the last good thing you can do is, to teach your kids all these things. Teach them about money management, fiscal discipline, budgeting, reading and doing good things with their life and money.
Hope you liked these personal finance tips. Any other additional tip you wish to share, please feel free to do so.
@GURUMOORTHI-G I feel active mode of investing is much better these days. There are so many platforms out there to help. Even the regulators are strict and favour investors. So, I personally like investing directly rather that the ETF or index funds route. What do you think? Am I right to some extent.
@harleen Nice and useful investing tips. What's this power of compounding? Can you give a brief idea about it? I mean, can you explain that in a simple language. I am not good in finance field. So, please clarify a bit.
@vijaykapoor282 I totally agree with you. Financial planning is really essential these days. Once we start earning whether in job or business, we should think about savings and planning investments too. The sooner we realise the importance of financial panning, the better and happier we can live in the coming days.
Hey nice details, very useful tips for beginners.
Personal finance is a subject that is of utmost importance but is not taught in our schools. We need to be more aware of it to be successful financially in our lives.
ETF or Exchange traded funds have evolved as a popular and low-cost way to invest worldwide for investors. Particularly for investors who do not want to track individual stocks but are interested in taking exposure to stock market.
What is an Exchange Traded Fund?
Exchange traded fund is a freely marketable security which tracks a particular index, commodity, bonds or combination of assets. ETFs are traded on the exchange. Hence, their price changes dynamically unlike Mutual funds which have a NAV at the end of the day.
Why Exchange traded funds(ETF) are not popular in India?
Unlike United states and other developed countries, Exchange traded funds haven't really taken off in India.
There are multiple reasons for the same.
Relative Under performance: ETFs have tended to under perform actively managed Mutual funds in India. Which is not the case in markets like US where ETF performance is not very far off from mutual fund performance.
Lack of choices/Diversification: Investors in India do not have too many choices when it comes to investing in ETFs. Currently, there are limited ETFs linked to the index and apart from gold not many commodity ETFs are available in the market. It's like a typical supply-demand problem, not much quality supply and hence not much demand.
Lack of Institutional interest: Few institutions have ETFs on the approved list of investment options. Hence, there are few institutions investing in Exchange traded funds.
Costs are low but not enough: ETFs globally have a low-cost structure while in India the cost is little higher. If you add brokerage costs the costs go up further.
Lack of Awareness: Because of low margins, not enough has been done to make ETFs popular amongst investors in India. With distributors not getting any margins, they are not promoting them much.
No additional tax incentives: In US ETFs are more tax efficient than mutual funds. This is not as such in India.This is primarily because mutual funds and ETFs are treated similarly as far as tax incentives are concerned in India.
Not enough liquidity: Lack of popularity of ETFs amongst investors results in reduced liquidity as they are traded in the market. This results in less efficient price discovery and higher spreads for investors. This is not the ideal thing to have in a traded asset class.
What do you think about ETFs in India? Will they gain more popularity? Feel free to share your viewpoint on the same.
You must have heard about Public Provident Fund having 15 years of maturity. But, you probably have no idea about its withdrawal rules and policies. That's why you have landed here!
Hoping you already know about PPF scheme, we are moving directly to the main crux.
Closure Of PPF Account:
The maturity tenure for PPF account is 15 financial years. It means, if you have opened the account in August 2015, you can close it on 31st March 2031. Once maturity period is completed, you can withdraw entire amount compounded in the account over 15 years.
PPF authorities have strict restrictions regarding withdrawal. You are not allowed to make a premature withdrawal unless money is needed for medical urgency or higher education. In such cases, the government has provided the relaxation. But still, your account has to be 5 years older for premature withdrawal.
Coming to the main point, you have three closure options once maturity period is finished.
How to close PPF account? Options available
At maturity, you have the following three choices:
Withdraw total PPF balance
Extension of PPF accounts without any further contribution
Extension of PPF accounts with further contribution
Let's discuss this one by one:
1. Withdraw Total PPF Balance:
After the completion of 15 years maturity, you have freedom to make the withdrawal. You can get entire PF balance along with the compounded interest. You won't face any problem for this step. Just take your passbook to the respective bank or post office and request for withdrawal. You need to submit a Form C with essential details and documents for withdrawal.
2. Extension Of PPF Account Without Any Further Contribution:
Sometimes, people don't need to withdraw PPF balance. The reason can be anything. In this situation, you can extend the PPF account that does not require any further contribution. For this option, you don't need to fill any form. Just sit there when maturity period is finished.
If you don't make a move to withdrawal, your account will go in this mode by default. By mode, I meant PPF account will act as the savings account. You can withdraw money when needed.
An extended PPF account will have following characteristics:
You can make the withdrawal anytime you want.
The withdrawal is allowed only for once in a year.
The amount left in the account will earn the interest.
To close the account, you need to make a complete withdrawal.
You cannot make any further deposits.
The account will have no privileges under section 80C.
3. Extension Of PPF Account With Further Contribution:
This is the most outstanding feature of PPF account. If you can maintain good cash flow movement, you should extend the PPF account with further deposits. For this, you have to make intimation within one year of maturity. Otherwise, you cannot avail this opportunity.
After maturity, you can extend the PPF account for further 5 years. The Form H is mandatory for the extension request. Once 5 years are done, you may make another extension request again with the Form H!
Talking about features, it pretty much acts like normal PPF account:
A minimum deposit of Rs. 500 per year is compulsory.
The account still claims the tax deduction.
Before 5 years, you cannot ask for closure.
For once in a year, you can make withdrawal as per need.
You cannot make withdrawal more than 60% of total PPF balance.
All three withdrawal options can prove beneficial as per your requirements.
For instance, you may use the first option if you need money right after the retirement.
The second option is great if you are financially strong and don't want entire PPF balance. In this way, you can earn interest and make a withdrawal when you need it.
The third option is an ideal situation for people with financial stability. As, this option comes with interest, tax benefits, and withdrawal relaxation.
Hopefully, you get the answer you were looking for! In case you have something valuable to share, please pen down your valuable thoughts.
Hi, Thanks for giving such helpful details. I already have a PPF account. I think maximum people in India do have a PPF account. It is the most common investment and tax saving option. So, I also opened one. Now, I have a decent income, so looking for some other investing ideas. I can take moderate risk only. Is SIP a good way to invest my excess funds? Can anyone who has invested, let me know a bit more about it? Some feedback on it is much appreciated.
@prateek Hi, I too agree to your point that in mutual funds: the more time you stay invested, the probability of good returns increases. In fact, I believe that one has to stay calm, not to panic on market lows and wait to cash in better results. Its normal human tendency that once market is low, we start withdrawing our investments.
But, I think a bit differently, one should wait a bit, analyse the market trends and try to lower losses.
For a salaried person, I think starting a SIP in mutual funds with a small amount can be a great idea. That doesn't burden his pocket plus he doesn't need to dive directly in stock market. So, dual purpose is solved. What do you think?
@harleen I was really confused as to what is demat account. I am not from investing field. I am a newcomer in investing. Many doubts got cleared after reading this. I am not interested in trading since that sounds risky. But, I wish to invest for long term.
@ishu Yes, financial planning is really crucial. The cost of living is so high these days. I wonder how the prices of products and services will sky-rocket in the coming years. So, it's better we plan well for our retirement. There are too many financial advisors, I really get confused which one to choose. Is it worth consulting a financial planner? What if, I want to manage my investments myself, is it possible? or Should I consult for better investment options?
"Blockchain" the underlying technology for cryptocurrency has been the talk of the town recently. Remember the 2017 huge crypto wave i.e. Bitcoin craze that took the financial markets by surprise. Bitcoin is just one use case of this blockchain technology. There are a number of use cases of this globally distributed ledger.
Hence, there's a lot to know about this fast emerging technology.
Here, you shall know about one use case i.e. blockchain and finance. How blockchain is changing the financial industry or is ready for it?
1. Cryptocurrency: This has surely disrupted the financial markets. The use and acceptability of altcoins in some countries has made it even more popular. It is entering the payment system at a much faster pace than it was thought to be. While some other countries have plans to regulate it.
2. Banking system: The global banking system is another area which is significantly getting affected by blockchain. A good example is popular cryptocurrency called "Ripple" that easily connects payments across different networks.
3. Insurance sector & Other Financial institutions: Blockchain technology, a digital revolution that is changing the world and its impact on the financial industry is already seen. A number of global financial companies are actively testing to harness the maximum benefits of this robust blockchain technology.
There are bright chances of spreading the use of blockchain to some mainstream financial utilities.
What is your opinion on blockchain? Do you feel it as the next big thing in the financial industry around you? or Is it still in the nascent stage still to add much more to its features.
Anyways, we can't deny the fact, that this digital transformation is all set to connect users across the globe.
Let's see how fast and how far this can lead to in the coming days.
Financial planning is a complex process which requires you to review your current fiances, cash flows, estimate future cash flows as well as financial obligations,create goals and map money that you will require to achieve the goal, understand amount of insurance you would need now and in future, look at your tax outgo and do tax planning, there are lot of tools for financial planning which can come handy for all these activities, this post summarizes some of these tools that can come handy as you try to create a good financial plan
This is a simple calculator which helps you calculate what kind of funds you will require to have a comfortable retirement. It calculates your retirement corpus as well as how much you should save now to achieve that corpus. This Retirement calculator uses your current expenses as a base and projects your future expenses based on inflation assumptions in future to arrive at your corpus.
Health Insurance Calculator
Health insurance calculator helps you to calculate the right insurance cover for you , in general health insurance should provide the right cover for you and your family, health insurance cover varies with your city , age and family status. Also premium changes with your current health condition etc.
SIP planner/calculator helps you create a financial goal and tells you how much investment you require every month to reach the goal, the goal can be your child's education and you might require certain money to take care of that, this tool can help you plan for that, this can also be an indication to
Budget planner is a handy tool to help you track your income and expenses, this helps you be tidy with your finances and understand how your money is moving
Fixed Deposit calculator:
Fixed deposit calculator helps you calculate the periodic interest on your fixed deposits, it also helps you to calculated amount at the end of the term of your fixed deposit, this calculator can be used not just for fixed deposits, but post office deposits etc. You can use following calculators to calculate amount on your fixed deposits
Income tax calculator:
Income tax calculators help you to calculate your tax obligations for the year, you need to select the right assessment year for the same, you can go to income tax department site and calculate your tax, you can go here
Disclaimer: Any views/recommendations expressed in the forum, of the individuals are their own only. Fintrakk doesn't endorse or recommend any financial product or views by the users of the forum. The information/comments on the forum should not be considered as a financial advise. Please do your own due diligence before investing. Fintrakk is not responsible for any financial loss to any of its visitor/user.