(Last Updated: August 19, 2019)
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  • @prateek I also thought ELSS is a good tax saving option until no tax was charged on capital gain arising from it. But, from this year, tax @10% has been imposed on ELSS funds also, I heard of it. I already have my money invested in ELSS but now I am really concerned that my returns will reduce due to this new tax factor on equity funds. ELSS is no longer a tax saving tool, I suppose. I am thinking to open a PPF account as well and divert some money to it. At least, the maturity amount is free in case of PPF. What is your opinion on this? PPF vs ELSS Which is better investment? Please guide.

  • @kvijay12345 Thanks for adding some more useful details. PPF has been a favourite investment and tax saving tool for risk averse investors since ages 🙂 Investors who look for safe investments, their most common choices are Fixed deposits and PPF.
    However, with changing times, people have started thinking beyond these traditional investing instruments.

  • @harleen That's right 🙂 a conventional and traditional way of thinking but time to change the clock.

  • Thanks for bringing it up , The current interest rate effective from 1 October 2018 is 8.0% Per Annum' (compounded annually).

    There is no good and bad investment , what we are discussing here depends on individuals (for a risk-averse individual) , it is the risk-free investment mode , provided you take care of below things before investing:

    PPF's salient features :

    • Tenure: 15 years; after 15 years completion account can be extended by 5 years at a time
    • Account matures in 15 years but the contribution has to be made for 16 years in all. Effectively, the PPF account matures in the first day of the 17th year. However, it can be extended indefinitely in chunks of 5 years
    • Premature closure is not permissible except in case of death of the account holder or after completion of 5 years when the money is required for treatment of a critical illness or to fund higher education
    • Loan against it can be taken from the third year onwards and withdrawals are permitted from seventh year onwards

  • @kvijay12345 PPF interest rate has been increased after a very long time. I was really worried looking at the falling PPF interest rate since past 1-2 years. At least a sigh of relief! I invest a small amount regularly in PPF scheme since I don't want to take any risk with my money.
    But, when the rate decreased to just 7.6% in previous quarter, I was tense, my savings will not give expected returns. I remember PPF interest rate used to be above 8.5% in 2012-13 or may be even higher.
    Hope the interest rate on PPF further increases and adds some more value to our savings.

  • Yes it is 8% from October 1st to 31st December 2018.

  • You are right that LTCG will have adverse impact on the returns from ELSS.
    But in my view, if you deposit Rs1.5 lacs in fin year 2018-2019, and withdraw it after locking period of 3 years, with positive expectations of 15% your amount 3 years would be approx Rs2.3lacs, i.e 80,000 if market goes up and gave you such return.
    For one thing, the returns only from ELSS wont be taxable as its less than 1 lac and even if you are redeeming other mutual fund investments in same financial year, the effective tax is less than what you have saved through investments.
    So I still say ELSS is quite good.

  • The decision to revise interest rates every quarter is quite useful in case of increase and decrease in interest rate.
    It will reflect inflation and interest changes by RBI in better way.

  • @jatinderchd If both the parents are utilising their full yearly PPF limit. Can the HUF contribute to Minor Child's PPF? Considering one of the parents PAN is in the PPF of Minor child, will the HUF contribution be added to the max. PPF of Parent's (Note: HUF has Parents and children only)

  • @shreem I have a bit idea that if you open your own PPF account and also on behalf of minor child then the combined limit shall be maximum Rs.1.5 lakhs only. So, Total deposit i.e. For self+minor should not exceed Rs.1.5 lakhs a year.

    But, since you are thinking to contribute from HUF to minor account, so rules might vary for that. You need to check with the respective bank regarding that.

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