Public Provident Fund (PPF) is one of the most famous and easy tax-saving instruments under Section 80C of the Income Tax Act. PPF is a long term government savings scheme with a lock-in period of 15 years, currently offering an interest rate of 7.1% per annum, compounded annually. […]
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Public Provident Fund (PPF) One of the most famous and easiest tax-saving instruments under Section 80C of the Income Tax Act. PPF is a long term government savings scheme with a lock-in period of 15 years, currently offering an interest rate of 7.1% per annum, compounded annually. However, the tax benefits available on PPF are its USP – the principal amount, interest earned and maturity amount are all tax-free.
As with any maturing investment, we can either reinvest or use it to meet our needs. if your ppf investment It is going to mature soon, but you do not need immediate funds at that time, so today we will tell you some investment methods that you can consider.
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Extend PPF Account Without Deposit
It is not necessary to close the PPF account on maturity. You can retain and extend the account term without making any further deposits. This way, you will continue to earn the applicable interest every financial year. But, if you extend your PPF after maturity without making fresh deposits for a year or more, you may not get the option to start fresh deposits in the account again. If you require funds, you can make partial withdrawals from the account during the financial year.
Extend PPF Account with Fresh Deposit
When the PPF account matures after 15 years, it can be extended for a block of 5 years with fresh contributions each time. To extend your PPF account, you must inform the bank or post office within one year of the maturity of the account. If you do not do this, your PPF account will automatically be extended for 5 years, but you will not be allowed to make deposits. Annual interest will continue to accrue on your balance.
Close the PPF and reinvest the deposited amount
After maturity, you can close your PPF account and transfer the amount to your savings account. To do this, you need to fill the account closure form and submit it to the bank or post office branch where you have your PPF account. You can then reinvest this PPF corpus in any other investment avenue based on your financial goals. Here are some investment options that you can consider:
Debt Fund:- If you fall in the low to medium risk appetite, then debt-oriented mutual funds may prove to be right for you. These funds invest at least 60% in debt or fixed-income instruments and the rest in equities. The debt component of the fund provides stability to your portfolio, and on the other hand, the equity portion enhances the value of your investment.
Balanced Advantage Fund:- These are dynamic funds, which can change the allocation between equity and debt depending on the market condition, and thus, are good for those with a moderate to high risk appetite. You can expect 8-12% returns from these funds over the long term.
Flexi-Cap, Multi-Cap and Multi-Asset Funds:- If you have a high risk appetite, you can consider investing your money in equity funds that invest across market capitalization. Such fund options include flexi-cap or multi-cap equity schemes. Flexi-cap funds invest in companies with varying capitalization without allocation-based restrictions. Multi-cap funds invest across different market capitalizations but there is no specific allocation mandate for different capitalizations. Multi-asset funds are another ideal option in which the investor gets the benefits of debt, equity, gold and real estate. Ideally, choose these funds only if you want to stick with the investment for at least 5-8 years.
The property deposited through PPF can be a huge capital, which should be looked after and managed wisely. If your PPF investment is maturing at the end of 30 years or early age of 40 years, consider activating it with fresh deposits. If you want to switch to some other instrument, consider choosing from the mutual funds mentioned earlier. This is because since you are still young, this type of investment can give a boost to your wealth-generation efforts. But, as you near retirement, consider extending your PPF with or without fresh deposits. If you want to make a change in investment, then you can also consider debt funds.