What is PPF?
The Indian Ministry of Finance introduced PPF or Public Provident Fund in 1968. You can claim up to Rs.1.5 lakh in your PPF account as a deduction from your taxable income under Section 80C of the Income Tax Act. Also, the interest you earn on your provident fund deposit is tax-free. PPF carries a long tenor of 15 years, which you can extend by 5 years multiple times. Currently, it offers 7.6% interest.
What is EPF?
EPF or Employee Provident Fund was introduced under the Employee Provident Fund Act in 1952. This is a retirement scheme that every salaried employee is entitled to avail from his or her employer. In lieu of this scheme, your employer deducts a fixed sum from your salary every month and deposits it along with his/her contribution to your EPF account. You can withdraw the amount when you change jobs, or at the time of retirement. Currently, investing in EPF will fetch you interest of 8.55%.
Benefits of a provident fund investment
- It helps you build a substantial retirement corpus.
- It helps you gain to make the most of tax exemptions by offering you deductions on the investment amount, as well as interest.
- There is no upper age limit to open a provident fund account.
- Investing in a provident fund helps you build a savings habit and secure your future.
- You can avail a loan against your provident fund if you need finances urgently. Here, the provident fund acts as collateral and secures the loan.
How you can amplify your PF investment with FDs
In order to gain enhance your investment further, you can reinvest the corpus you receive on maturity of your provident fund by investing it in a cumulative or non-cumulative FD. In case you choose cumulative FDs, the interest on your deposit is accessible to you at maturity. It is added to the investment amount each year, thereby giving you benefits of compounding of interest. On the other hand, non-cumulative fixed deposits give you access to regular payouts at an interval of your choice, be it monthly, quarterly, and semi-annually or annually. This form of FD helps you meet periodic or regular expenses with ease.
However, in order to maximise your returns on FDs, you should choose company FDs from trusted issuers like NBFCs. You can gain high-interest rates of up to 8.75% on these Fixed Deposits. Moreover, with ICRA’s MAAA (Stable) and CRISIL’s FAAA/Stable rating, these FDs also offer you a range of benefits such as a loan against the FD, online account management, flexible tenor and additional interest of 0.25% on renewal.
So, don’t think twice before investing in a provident fund, be it EPF or PPF. It will help you build wealth over time while adding stability and security to your investment portfolio.
Source: Sify Finance