Almost everyone is aware more or less about public provident fund (PPF). But I have seen that very few people recognize its true value. I tried to sensitize many of our colleagues to open PPF account. But very few were eager about it. While there is no other investment scheme which is as flexible and beneficial. I have seen that the biggest obstacle for PPF is its long maturity period. You must have also considered that lock-in 15 years is too much. But my friend! This is the biggest virtue of PPF. Actually If you plan methodically this lock-in period will not bother you. Today I will give you 8 tips about how to take maximum benefit from PPF.
1- Open PPF Account As Early As Possible
This only step will make PPF very useful for you. But going to the benefit of this I would like to tell about my experience with PPF. I have been in the service from last 10 year. Unfortunately, in early years no one told me about PPF account. Later I discovered the PPF but procrastinated on it. I was just saying to myself that I had to open PPF account. In this procrastination 2 years passed. Then I started to search for the bank. People told me that I should open account in SBI. But the SBI branch near to my residence was not offering PPF account. Again, I forgot it for one year. Next year when tax saving season was there I went to the main branch of SBI. There the clerk designated for the PPF account told me that he can’t open a PPF account as I don’t have saving account in SBI. I came back. Again, one year passed. Finally, I opened a PPF account in Bank of Baroda last year. Till then I understood that already I have missed many years. If I could open PPF account 10 years ago I may get these benefits.
Benefit of Opening PPF Account Early
- My current investment in PPF would have only 5 year lock in period as my PPF account must have completed 10 years.
- I could also withdraw some money for emergency, as 7 years limit would have been crossed
2- Schedule Monthly Investment in PPF
It is not mandatory to invest in PPF account every month. Single 500 rupee investment in a year is enough to stay your account active. But to get the most benefit of PPF you must invest regularly. Regular investment is the best saving tip. Give a standing instruction to your bank for monthly transfer in PPF account. It can be done online also. This one time instruction will give you a big reward.
3- Invest Lump Sum Also
Besides regular investment you should also try to invest in lump sum when you get extra money. You get a bonus, Put some amount in PPF account also. This lump sum money will make yourmaturity amount fatter without pinching you . Also more investment means more tax saving also. Take care you can’t put more money in PPF account than the 80C limit.
4- Open Account In Start of The Financial Year
Is lock-in period bothering you? Do you want to make it a little shorter? I have a tip for you. Open PPF account in the first 5 days of the financial year. Opening an account before 5 April would be considered the investment of the same year. But if you miss the 5 April date, then your account opening year would be considered from next financial year. You can understand this by below example.
Suppose You open your account on 2 April 2014 then your account will mature on 31 March 2030. But if you invest on 7 April 2014 then it will mature on 31 March 2031. But have in your mind that it will never benefit to delay the opening of the account.
5- Deposit in Start of Every Month
Earlier, banks used to give interest on minimum balance between 10 of the month to last day of the month. Now they give interest on daily balance. But PPF is practicing such tradition yet. PPF will only count the money for interest if it is deposited before the 5th of the month. So If you want the interest for whole month deposit your sum before the 5th of the month.
6- Choose The Bank Which Gives Online Fund Transfer Facility in PPF Account
You should not miss your regular investment in PPF. Also, you should not have any excuse to break the regularity. The regular online transfer mandate will be very useful in this regard. The online fund transfer facility should be also used for the Public Provident Fund. But Unfortunately, today not every bank gives this facility for PPF. Hence, if you are going to open a PPF account, then check if the bank has online viewing and transfer facility for the PPF also. Of course you can give standing instruction physically also. But the online facility will give you more ease and less chance of missing investment.
To my knowledge these banks give online fund transfer facility for PPF account.
- SBI
- ICICI Bank
- Bank of India
- IDBI
- IOB
- Allahabad Bank
7- Take A Loan From PPF instead of Personal Loan
It may happen that you need money for short periods? Also, you may not have any mortgage offer. Then you would have only option to take the personal loan. But if you have a substantial amount in provident fund account, then you can take a loan against it. The interest rate would also be less. Normally, personal loan interest rate varies from 13-36%. But Interest of loan against PPF would be only 2% more than the PPF Interest rate. It may come around 11%, according to the current rate of PPF.
8- Open PPF Account in the Name of Your Child
You plan and your child will enjoy the PPF account which will have only maximum 5 year lock in period. Yes, it is possible if you open a PPF account for her while she is in childhood. Till she becomes adult first 15 year lock in period would be completed. Afterwards there would be lock-in period of only 5 years. As the minimum investment limit is only 500 per year, so this should not bother you. Further, you can invest money in this PPF account for her study or marriage also. It will give you a double benefit.
