Why you should consider investing in a PPF for your retirement?

After retirement, you no longer have an active flow of income to meet your requirements and sustain your regular lifestyle. So, in order to manage your expenses, start saving and investing from an early age. One of the best instruments to plan for retirement is starting a provident fund (PF) or Public Provident Fund (PPF) account, which keeps your money safe and allows it to grow over time.

PPF was started by the government to promote long-term savings and to ensure that you have a regular source of income after you retire. Tax savings also play a large role when it comes to choosing an investment route for your retirement as it protects your hard-earned money. Whether you are salaried or self-employed, you can secure your retirement by starting a PPF account and pay no tax on interest earned.

Retirement planning with PPF can help you earn income and fulfill your retirement goals, and enjoy the remainder of your days doing what you love. Read on to know why you should invest in PPF to secure your retirement.

• Encourages regular savings

When you open a PPF account, you need to deposit a minimum of Rs.500 or a maximum of Rs.1.5 lakh on yearly basis, in a maximum of 12 installments per annum, for a minimum of 15 years. This practice helps you enjoy the benefit of compounding interest along with tax exemption on interest earned.

Each year you will earn interest on your PPF account at the rate prevailing in the market. For the quarter of October 2018 to December 2018, the rate is 8% interest on your PPF account. After the lock-in period is complete, you can withdraw the PPF amount and deposit it in any long-term instrument like a fixed deposit, NCS, mutual funds or you can further extend it and add to your compounding returns.

• Simple eligibility criteria

If you are an Indian resident, you can simply open a PPF account with any post office or bank to earn good returns. It is a long-term saving instrument that allows you to start investing at an early age and earn regular income after retirement. As the scheme is under the care of the government, it protects your invested amount completely.

• Reduces tax liability

Investments in PPF account up to Rs.1,50,000 are eligible for tax deduction under Section 80C of the Income Tax Act. Also, the interest earned and the amount received by you at the time of maturity are tax-free in your hands.

• Allows premature withdrawal

In general, a PPF has a lock-in period of 15 years and can only be closed in case of the untimely death of the account holder. If you need money on an urgent basis, you can prematurely withdraw money from the PPF account in the form of loans and withdrawals. However, to withdraw money from the PPF account, you need to fulfill certain terms and conditions. You can withdraw only 50% of the invested amount by the 5th year of your investment and you can make only one withdrawal per annum.

This scheme is backed by the government and thus, it is one of the safest investment options for retirement. If, along with your tenor, before the 7th year, you require money, you can apply for a loan up to 25% of the PPF balance in your account.

After the maturity of your Provident Fund(PF) account, You can grow your corpus further, you can consider investing in a Fixed Deposit scheme from trusted NBFCs such as Bajaj Finserv to earn interest up to 9.10% if you are a senior citizen investing in a Cumulative FD for at least 36 months. This ensures that you have instant access to an ample amount and cater to all your financial requirements post-retirement.

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Aman Khanna is an experienced financial advisor. He has written numerous pieces on various investment topics like Mutual Funds, FD, RD and many more.