Investing in a PPF remains one of the top options for investors looking for liability exposure as far as retirement planning is concerned.
Salarymen have an employee provident fund. In this fund, amounts are contributed by both employers and employees, and the main exposure is debt. Those without access to EPF will consider her PPF as an alternative. PPF is a safe and robust way to build a retirement corpus. There are tax incentives under Section 80C of the Income Tax Act at the time of investment, but there are additional incentives as the interest earned on the investment is tax exempt.
These benefits make it a very attractive investment for those who fall under the higher tax rate category.
The interest rates offered in PPFs show a clear difference in terms of interest rate movements compared to other microsavings schemes.
In the current cycle of rising interest rates, especially in the last two quarters, the government has increased interest rates on most microsavings schemes. PPF is a notable exception as the government has kept interest rates at his 7.1% since April 2020. Leave PPF as is.
It should be remembered that the interest rate was reduced from 7.9% to 7.1% for the April-June 2020 quarter. This is due to the declining interest rate trajectory seen in the economy, where interest rates continued to fall during the pandemic while the PPF rate remained static. This lowered PPF rates for the first time in decades. The last time it was lower was in 1976-1977, when the PPF percentage was 7%.
Changes in interest rates are extremely important to PPF as they affect investors as a whole.
The quarterly rate affects not only the new investment amount, but also the total amount saved up to this point. This means that the impact is greater for those who have a large corpus, and as far as the overall accumulation of accounts is concerned, this can have a large impact. , with an initial term of 15 years, which can be extended indefinitely in 5-year blocks thereafter.
For this reason, it is important to view it as a long-term investment from a financial planning perspective.
