PPF Scheme: PPF interest rate is lower than Employees Provident Fund (EPF) interest rate, which is less attractive for salaried employees, who allocate more amount towards EPF through Voluntary Provident Fund (VPF) for better returns and tax benefits. can do.
PPF Balance: Public Provident Fund i.e. PPF scheme is a very famous long term savings scheme in the country. This scheme provides the facility of investment for a long time. At the same time, the interest rate given in this scheme is reviewed every three months and if needed, the interest rate is also changed. Currently, the PPF scheme offers 7.1% interest rate with effect from April 2023. However, like every other savings scheme, PPF also has some disadvantages. In such a situation, here we are going to tell you about the five disadvantages of PPF.
1) Less than EPF interest rate
PPF interest rate is lower than Employees’ Provident Fund (EPF) interest rate, making it less attractive for salaried employees, who can allocate more amount towards EPF through Voluntary Provident Fund (VPF) for better returns and tax benefits . The current EPF rate is 8.15% while the current PPF rate is 7.1%. Many salaried people use PPF to reduce their taxable income. Salaried individuals can get comparable tax benefits and higher interest by allocating large sums in Provident Fund through VPF instead of investing in PPF.
2) Long lock-in period
PPF account takes 15 years to mature. People who really want to invest for the very long term are better suited for this strategy. However, PPF’s long lock-in period of 15 years makes it unsuitable for short term needs. If investors have an urgent need, they may have to consider other solutions.
3) Fixed Maximum Deposit Limit
You can deposit a maximum of Rs 1.5 lakh in a PPF account in a financial year. In such a situation, this scheme is not for salaried employees who want to deposit more than Rs 1.5 lakh in a financial year.
4) Strict Withdrawal Rules
Premature withdrawal from PPF has strict conditions and is limited to one withdrawal per financial year after five years, except in the year of account opening. Premature closure is permitted only after five years subject to specific conditions and 1% interest deduction. If the account holders do not want to continue investing, they can keep the account running by depositing Rs 500 annually.
5) Premature closure of account
As per the PPF rules, early closure of the account is allowed only under the following circumstances-
- The account holder, his or her spouse or their dependent children have a life-threatening illness.
- For higher education of the account holder or his dependent children.
- Change in residential status of the account holder.
- Also, in case of premature closure, 1% interest will be charged from the date of account opening. Instead of requesting for early closure, PPF account holders who do not wish to continue investing in the scheme can maintain it by depositing ₹500 every financial year.
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