Ppf nuances

It was an interesting insight that I got while decoding the Ppf into a little bit more detail.  These are key points which are little known and hence I thought I would make this post

1. If you don't deposit before the 5 th of the month, one doesn't get interest for the month. This is a big negative. In other bank accounts one gets daily interest.. hence this slips ones mind. The Ppf account follows the banking practices as it was some fifteen years ago.

2. One can also open an Ppf account in ICICI bank. This is one of the only private banks which has been allowed to open Ppf accounts by the government. So if you want to open one where you will get some better customer service.. go for ICICI bank. ( Sbi, post office etc are the other places )

3. One cannot open more than one account in your name. However you can open another account in guardianship for your child. So a family can have four accounts but two children cannot have the same guardian.

These are three points which I thought were important.  If you have any other ones... please feel free to add on.

Ppf limit is now Rs 100,000!

Recently the RBI changed the limit of investing in ppf from a maximum of Rs 70000 to Rs 100,000.

This is a huge boon for all people in India and everyone should try and maximise the limit.

The first rule of investment as I have always said is to max the ppf limit, even before investing in equity or other types of funds.

Ppf is completely risk free and tax free. So a 8% is actually around the 10.5% pre tax return with Zero risk!

The impact of saving Rs 30,000 per annum additionally to your retirement or Childs education planning is huge.
This also goes directly to your Rs 100,000 limit of 80c tax benefits.

Don't wait.. Go ahead max it up and sleep well!

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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PPF-- EEE

Thank god for small mercies.

As per todays news PPF , GPF all will fall under EEE ( Exempt Exempt Exempt) tax benefit and not the earlier planned EET ( Exempt Exempt Taxable) tax critieria in the new direct tax code.

what it means is that the ppf will not be taxable when u withdraw it.

However it is not yet clear how ULIPs etc will be treated going forward.

But with this clarification- it becomes clear-- PPF still remains the safest and best bet for investments..

so if you had planned to not start your ppf account, renew it or your kids...

change track... and lets get started on the path again.

Increase if u want your allocation in your pf

PPF makes sense!!

Happy investing!