PPF- Next steps

Earlier I had written about PPF and the fact that it was not going to come in the EET framework ( Read the post here) . I had also suggested that dont stop investing in PPF because of these changed scenario.

However recent developments do have a cause for concern and request a rethink- or at least a wait until we get further clarity.

There were two important aspects to PPF-

1. The fact that the returns were exempt from TAX ( even though the investment amount was limited to 70,000/- per annum)
2. The rate of interests while they were being set once a year- were quite lucrative  . The interest for this financial year has been set at 8.5%.

While the first aspect has been cleared ( EEE going forward), the rate of interest that will get decided is the concern.

The interest rates in the market today are at 7% for FD's and an 8.5% POST tax is GREAT.

With the government trying to reduce Fiscal debt and taking some bold measures ( like the petrol deregulation), it is also expected that they may reduce the interest rates for PPF ( i mean it is a subsidy-- especially when the market delivers so much less).

It will not be an easy decision if it happens so it is going to be circumspect.

So what's the next steps?

Go for PPF-- even a new account for your children if required( you will get a good return at least for this year)-- But re evaluate the investment going forward.

Even if the investment doesnt make sense- one only needs to invest a minimum of 500 Rs every year to keep the account open.

PPF is still the best bet - the foundation of any investment plan-- go for it.

- I love what Ashu Dutt in the channel ET Now Says--- the best investment planner is you yourself-- listen to people- but take the decision yourself.

Happy Investing

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