“Discover the drawbacks of investing in PPF (Public Provident Fund). Explore factors like lower interest rates, extended lock-in periods, restrictions on early withdrawals, and limitations on maximum investment amounts. Learn about the challenges of premature closure and the absence of joint PPF accounts. Understand the implications for NRIs, HUFs, and trusts. Make informed decisions about your long-term investments by considering the disadvantages highlighted in this comprehensive guide.”
As we all know what are the benefits of investment in PPF and as an individual whether a salaried or non- salaried employee we wall go for investment in PPF because it offers good interest rate along with tax free interest income.
Now in this article we will come to know about the disadvantages of investment in PPF: –
1. Lower Interest Rates: – Currently PPF provide 7.1% P.a. Interest rate and it has not increased from many years. Now Interest rates are increasing even Many banks are providing 8% – 9% Interest rate on Fixed Deposits. PPF Interest rates are lower than interest rate of EPF, for salaried employee VPF is better option as compared to PPF which provides higher rate of interest.
2. Higher Lock -in period: – PPF has a lock in period of 15 Years which is very huge unless a person wants to invest for very long term it is not a good option alternatively one can invest in fixed deposit of 5 years or National saving certificates which offers similar or higher interest rate.
3. Restriction on early withdrawals: –Before investing in PPF you should always keep in mind for early withdrawals rule. In any case you can’t withdraw money from PPF before the completion of 6 years from the year of opening. After 6 years also you can’t withdraw entire amount, you can withdraw only 50% of the total amount available at the end of fourth year from the date of opening of PPF account.
4. Premature closure of PPF account not allowed: –Early closure of PPF account is not allowed. You can close PPF account only after completion of 5 years from the year of opening of account that too is allowed only in case of below conditions: –
> For treatment of life-threatening disease of account holder, spouse of account holder, parent and dependent children
> In higher education of account holder or dependent children
Apart from above reason you can’t close your PPF account before the completion of 15 Years and for this you must deposit minimum Rs. 500 In every financial year to keep alive this PPF account.
5. Limit on maximum investment amount: – You can investment maximum amount up to Rs. 1,50,000 in one financial year where as for salaried employee they can invest upto Rs. 2,50,000 in VPF (Subject to 10% of Basic+ DA) with no additional tax outflow.
6. NRI Can’t open PPF account: – NRI can’t open PPF account. However, if a person had a PPF account when he was a citizen of india he can enjoy the benefits even after becoming and NRI.
7. HUF & Trust Can’t open PPF account: – Earlier HUF & Trusts are allowed to open PPF account but now this facility has been withdrawn from HUF & Trust.
8. Online facility in PPF account: – PPF account can be open through banks and post office. Banks are providing the online facility for transactions in PPF account but currently Post offices are not providing online facilities. So this should be keep in mine while investing in PPF account.
9. Joint PPF account can not be opened: – You can open PPF account in individual capacity only. In PPF account joint holders are not allowed except in case of minor.
Conclusion :- PPF is a one of the investment instrument for individuals for saving their money for long term but before investing we should keep in mind the above point and decide about the best investment option as per the individual requirements.
Author Bio
PPF enjoys EEE (exempt exempt exempt)