How to save money with PPF - A safe investment for your future

When it comes to investments, there are various options available in the market. While some are market-linked and do not guarantee returns, others are safe investments offering fixed returns.

If you want to add a debt component to your financial portfolio or if you want assured returns, fixed-income investments are preferable. When it comes to fixed-income investments, the Public Provident Fund (PPF) is a good choice. Let’s understand how to save money with PPF.

What is the PPF scheme?
 

PPF is a government-backed, long-term investment scheme with guaranteed returns. It is an affordable saving option which offers fixed interest income over the deposit tenure. Some of the features of PPF are as follows -

1. You can save money in the PPF scheme by opening an account with as low as ₹100
2. The minimum annual investment is ₹500
3. The maximum investment amount is ₹1.5 lakhs
4. You can invest multiple times during a financial year without restrictions
5. The investment tenure is 15 years. You can extend the tenure in blocks of 5 years
6. It is mandatory to make a deposit every year to keep your account active
7. You can make partial withdrawals from the PPF account from the 5th year, subject to specific terms and conditions
8. Loans are also available against your account after the completion of 1 year
9. Investment made to the PPF scheme qualifies for a deduction under Section 80C up to ₹1.5 lakhs

How does the PPF scheme work?
 

You can open a PPF account in your name or on behalf of a minor. After you open the account, you can make deposits ranging from ₹500 to ₹1.5 lakhs during the financial year.

The account keeps earning interest on the accumulated balance. The interest is fixed by the government and reviewed regularly. Currently, the PPF interest rate is 7.10% per annum, which is compounded annually.

After 15 years are over, you can withdraw your PPF account balance and use the funds for your goals. You can also extend the term by another 5 years if you want to stay invested.

Benefits of the PPF scheme
 

Some of the primary benefits of the PPF scheme are as follows -

1. Risk-free returns
 

Since the PPF is backed by the government, it carries no investment risks. You get assured returns on your savings even when the market turns volatile.

2. Affordable
 

The minimum investment required to open a PPF account is ₹100, which is quite low and affordable. Moreover, the minimum annual investment is ₹500, which suits every type of investor.

3. Tax benefits
 

One of the main benefits of the PPF is its tax-saving angle. The amount you deposit into the PPF scheme qualifies as a deduction under Section 80C up to ₹1.5 lakhs. The interest earned and the maturity benefit received are also fully tax-free.

4. Disciplined savings
 

PPF require regular investments to keep your account active. This helps inculcate a habit of disciplined savings, which can build a good corpus over the long term.

For instance, say you start investing ₹5,000 every month in your PPF account. At the current interest rate of 7.10% p.a., your corpus after 15 years would amount to ₹15,77,840, all with a disciplined approach.

5. Flexible deposits
 

There is no limit to the frequency of deposits, making it easy and flexible to manage your finances. You can make annual lump sum investments or deposit every month and create a guaranteed corpus for your financial goals.

How to open a PPF account?
 

You can open a PPF account with a bank or post office. While most banks allow online and offline investments, the post office usually allows offline investments.

To open a PPF account, you must meet the eligibility parameters and submit your documents. The eligibility and document requirements are as follows -

If you fulfil the eligibility requirements and have the necessary documents, you can open the PPF account online in the following way -

1. Step 1 - Visit your bank’s website or mobile application.
2. Step 2 - Select ‘PPF’ and choose to open a new account.
3. Step 3 - Fill out the online application form, stating the deposit amount.
4. Step 4 - Upload all relevant documents.
5. Step 5 - Submit your application, pay the deposit online, and verify your submission with a one-time password (OTP).

PPF withdrawal and loan rules
 

Though the PPF account matures after 15 years, it offers liquidity through loans and partial withdrawals. Understand the rules of each to know how to access your funds -

PPF v/s fixed deposits v/s mutual funds
 

Besides PPF, fixed deposits and mutual funds are also popular among investors. Let’s understand how they compare against one another -

Maximise PPF benefits for attractive returns
 

PPF is a smart investment that offers guaranteed returns without any risks. Invest in the PPF scheme and accumulate a corpus for your financial goals. To maximise returns, invest every month, understand interest calculation, and avoid withdrawals.

Keep investing in the PPF account to keep it active. You can also auto-debit your savings account to automate your investments. The IDFC FIRST Bank Savings Account perfectly complements your PPF investments. You can grow your savings with the auto-debit feature, mobile banking app for easy transfers, and attractive interest rates. Know how to save money with PPF and start your journey with a high-interest IDFC FIRST Bank Savings Account for seamless transfers.