For many decades, public provident funds—PPFs—have been a popular choice especially for risk-averse investors happy with modest but assured returns. PPF is among the most reliable investment tool even if other platforms like mutual funds are becoming more and more popular since of the government's sovereign guarantee on the principal invested and interest acquired. Still, many investors lack the knowledge regarding many of PPF’s key features. 

So here are some key features of PPF that you should know about:

PPF Rates are Reviewed Every Quarter

PPF currently offers yearly returns of 7.1% p.a. The Ministry of Finance (under govt of India) examines interest rates every financial quarter using government bond yields as guide. Returns on PPF grant Exempt-Exempt-Exempt (EEE) tax status, which under Section 80C of the I-T Act means that underinvestments, interest earned, and proceeds collected upon maturity are all tax free. PPF offers a benefit over five-year tax-saving fixed deposits from banks and the post office since PPF's interest income is taxable depending on the tax slab of the depositor.

You Can ExtendedTenure Beyond 15 Years of Lock in

Either close the account and take the money when it matures after 15 years, or extend the maturity period by five years with or without extra deposits. If you keep your PPF account open without making any fresh deposits, you do not need to let the branch know about such extensions; the account will be automatically renewed. After that, though, no more deposits will be taken in. For the next five years the PPF balance would keep earning the relevant interest.

You must notify the branch in writing by completing Form H no later than one year after the maturity date if you would want to make new deposits to your PPF account.

Availability of PPF Calculator Tool

There are Ppf calculator tools available online nowadays to help investors estimate their corpus amount as per the chosen tenure and interest rate that is being offered in return. These tools are useful in providing business insights for planning long-term investments, allowing investors to forecast future savings based on different interest rates and timelines.

PPF Offers Some Degree of Liquidity

Starting the seventh year of account opening, you are allowed one withdrawal annually. Either the amount at the end of the year before, whichever is less, or half of the remaining balance at the end of the fourth year before the current year. PPF is in the EEE category, thus withdrawals made before the maturity period are tax free. You must, however, show these withdrawals on your income tax returns.

Premature Closure also Allowed

You have to have completed at least five fiscal years to be qualified for an early closing. Premature closure is only allowed in the event of the death of the account holder, spouse, parent, or child, or if the money is needed for the higher education of the holder or a minor account holder. Should a medical emergency or death arise, you will need to submit supporting documentation from the relevant medical authority to get confirmation of admission from an accredited higher education institution either in India or abroad.

Keep in mind early closure carries fines. Should the account be opened and closed early, your interest will be paid 1% less than the relevant rate.

Facility of Loan Against PPF

From the third to the sixth fiscal year, you can borrow against PPF up to 25% of the total amount deposited at the end of the second year prior the loan application year. Either in full or in two or more monthly payments, the loan has to be paid back three years after the date it is approved. After the principal has been repaid in no more than two payments, you will be obliged to pay interest at a rate of 2% per ann over the relevant PPF interest rate on the principal amount. Should you be unable to fully or in part repay the loan within three years, interest on the outstanding loan amount will be charged at a rate of six percent annually on top of the relevant PPF interest rate.

Transfer PPF Account

You can transfer (transfer) your PPF account for a number of reasons, including a job move to a different city or the need for improved services, should you be dissatisfied with your present account provider. Starting the transfer requires you to visit your present post office or bank and file a transfer request. Once the request is received, the provider will send the closure documentation—which is required to transfer and open the PPF account with the new PPF account provider. Beginning a bank-to---bank PPF transfer requires opening a savings account with the new bank. Should you already have a bank account, you can open a PPF account using a new PPF account opening form, the original PPF passbook from your former PPF account provider, and the nomination form.

Is it Enough to Ivest in PPF?

Remember that PPF is suited for risk-averse investors that value capital preservation above growth. Offering benefits like sovereign guarantee from the government and tax-free returns, PPF is the safest fund accessible for investing. But when it comes to returns, for investors with a five-year investment horizon and a moderate to high risk tolerance, equity mutual funds can be preferred over PPF. While there is Ppf calculator to help you estimate your expected corpus after 15 years of lock in, the returns on PPF are lesser than equities, especially in the long run. 

Over long tenures like 10 years, 15 years or 25 years, investing equity mutual funds, including SIPs, have the potential to greatly beat fixed income instruments like PPF and inflation. Also, like ppf calculator, mutual fund SIPs offer sip calculator india to help you estimate the expected corpus at the end of your investment tenure. Make sure that as an investor, you utilize all such online free investment tools to get a fair idea about how much accumulated corpus you are likely to get after investing your hard earned money over a period of time, especially if its or long term.