PPF strategy for a better fund value
May 11, 2023
DD Planet
PPF (Public Provident Fund) is a good retirement investment in India. The advantage with this is EEE, i.e., investment, interest and withdrawal, all the three components are tax free.
Here are the tips on formulating a PPF strategy that can bring you substantial money at retirement:
- Start early. The more you stay invested, the more money you shall have at the time of retirement. Another advantage is once you are in the scheme beyond fifteen years (the initial maturity period of PPF), your maturity extends by a multiple of five years only.
- Do not withdraw money from the scheme until you land in an emergency.
- Choose the PPF extension 'with contribution' after the maturity of fifteen years so that you can continue enhancing your retirement corpus.
- Invest in the beginning of a financial year, i.e., in the month of April or May, instead of waiting till the end.
- Even if you are choosing the new tax regime in which deductions are not allowed, you should choose PPF as a retirement tool. Do not see it just as a section 80C benefit.
- Remember when you extend PPF after fifteen years for another five years, you cannot withdraw any money in the extended five years, and that continues once you go on further extending for another five years and so on. Therefore, create a separate emergency fund when you’re extending it.
- Except if the annuity rates are quite impressive, do not make a partial withdrawal to buy annuity at the time of extending the PPF scheme after fifteen years.
- If there are no budget constraints, invest the maximum amount (which is currently 1.5 Lacs) every year.
- Do not exit PPF if rates are lowered for one or two odd years in between. Make a change only if the returns are way lower than the market or if there is a change in the tax breaks.
