How can you maximize your returns in PPF?

Public Provident Fund is the government-backed investment scheme that aims to mobilize the small savings and get high returns with tax benefits in the long term. 


How much do you know about the PPF scheme?


  1. To invest in a PPF scheme, you need to deposit a minimum of Rs. 500 in a financial year in your account. The maximum limit of investing in PPF accounts is Rs. 1,50,000 in a fiscal year.
  2. The rate of returns on the Public Provident Fund is determined by the Finance ministry every quarter. The PPF account interest rate was revised recently on 1st April 2020, and it stands at 7.10%.
  3. The lock-in period of investing in PPF accounts is 15 years. However, you can extend the term in a batch of 5 years.


Benefits of investing in PPF account:

  1. The returns on the PPF scheme are not subject to any market risks and determined by the government. Thus, you get guaranteed returns on your investments.
  2. Public Provident Funds is a saving-cum-tax- saving instrument where you can save taxes on the interest earned on PPF
  3.  principal amount invested, and the total amount received on the maturity of the PPF. You can earn up to Rs. 1.5 lakhs on your PPF investments under Sec 80 C of the Income-tax Act.

Tips to get maximum returns from your PPF investment:  If you want to earn high returns on your PPF deposit, you should carefully choose when and how much you want to invest in your Public Provident Funds.

How much you should invest in a PPF account: While there is no limit on how much you can invest every month. It would be considerate to deposit the funds as a lump-sum amount at the beginning of the financial year. It is because the interest on the PPF account is calculated before the 5th of every month. Thus, if you deposit the entire amount of 1.5 lakhs at the beginning, you can get the maximum returns.

When should you invest? : If you don’t have sufficient funds to invest together, you can invest the funds as a monthly investment in your PPF account. However, to get the maximum returns, you must contribute in your account between 1st and 5th of every month. It is because the interest is calculated on the minimum balance of the account before the 5th of every month.

Investing the funds for your children: Any Indian resident above the age of 18 years can invest in a PPF account. As the investments in the PPF account are tax-free, parents can open the PPF account separately in the name of their children to get maximum returns out of their funds.

Extending the tenure of investment: While the lock-in period of PPF is 15 years, you can extend the mandate in a block of 5 years. To continue the account, you need a minimum of Rs. 500 for your deposit. Thus, you can earn the returns on your investment with the minimum contribution in the account.

 Using the PPF funds for an emergency: The funds in the PPF account can also be used in case of an emergency such as the cash crunch. You can either withdraw the funds from the PPF account or take a loan against your PPF funds. The rate of interest against these loans is lower than a personal loan.

Using the PPF calculator: You can use the PPF calculator to determine the interest and the total return on your deposits. Using an online calculator can help you to get a more accurate picture of earnings on your finances.

Mode of investment:  The online facility of depositing the funds in a PPF account is more comfortable. You can choose to contribute funds in your account as per your time and convenience. On the other hand, if you deposit in the account by visiting the bank, you may not be able to make the investments as and when needed, thus lessening your chance of earning maximum interests on your investment.

 Conclusion: When it comes to earning returns on your investment, a small number of funds invested at the right time can bring the maximum return in your PPF account. Thus, you must strategize your investment efficiently at the best time and with the best mode of investment.

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