The Public Provident Fund (PPF) stands as a long-term savings and tax-saving scheme backed by the government. It allows investors to trim annual taxes and amass a substantial corpus. Being exempt from taxes, including earned interest, PPF holds a prominent place among the top tax-saving investments under Section 80C of the Income Tax Act. Operating for a minimum of 15 years, it offers the facility of limited partial withdrawals.
Investors can contribute up to Rs 1.5 lakh annually, either as a lump sum or in multiple installments, with a minimum of Rs 500 per year. Opening a PPF account is possible at major banks, both private and public, or at post offices. With annual returns currently at 7.1%, PPF remains one of the most lucrative traditional investment options. When your PPF account matures and you don’t require the funds immediately, various options are available to manage your corpus effectively.
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Extend the Tenure
You may consider continuing with the PPF account with further deposits as you have been doing so far. This extension is in a block of five years which can be further stretched with similar periods. But for the same, the PPF investor has to inform the bank or the post office within a year of maturity. Upon failing to do so, you would not be able to make fresh deposits. But your balance will continue to get the yearly interest.
Reinvest Corpus
Once your PPF account matures, you may close your account and get the total proceeds in your savings account. For the same you need to fill an account closure form and submit at the respective branch of the bank or the post office. Since it is a considerable corpus and you are not in need of the funds, it’s advisable to reinvest the proceeds in alternate investment avenues to reap larger benefits. Following are the avenues, you may consider as per your risk profile.
Debt Funds
If your risk-appetite is low to moderate, you may consider debt-oriented hybrid mutual funds which invest about 65-75% of the assets in debt. Debt portfolio offers you stability while the equity portion provides additional push to your investment value. You may even consider dynamic bond funds which are like evergreen debt funds offering you stable returns.
Balanced Advantage Funds
If your risk profile falls in the moderate to high category, you may choose dynamic funds which can frequently change allocation to debt and equity as per the market valuations. This category of funds can comfortably fetch you returns of 8-12% in the long run.
Flexi Cap, MultiCap & Multi Asset Funds
If you’re comfortable taking some investment risks, consider equity funds that spread their investments across different company sizes in the market. Flexi Cap equity schemes offer the flexibility to invest in various companies without set limits, while Multicap Funds have a specific allocation strategy across market sizes. Additionally, Multi-Asset Funds are beneficial as they combine debt, equity, gold, and real estate. But remember, it’s essential to opt for these funds only if you plan to invest for longer terms.
Adhil Shetty, CEO, Bankbazaar.com, says, “The money you accumulate through PPF investments is your lifelong savings. It’s essential to handle and manage this savings sensibly. If you’re nearing retirement, you can continue your PPF, with or without putting in more money. If you wish to change where your money is invested and wish to take risk for higher returns you may consider mutual funds or other investment options, offering you higher interest rate. If your PPF account matures when you’re in your late 30s or early 40s, you may reinvest for more lucrative returns.”
These tips will help you earn higher returns and make the right use of your PFF corpus. It is essential as you cannot let the funds remain ideal and not use the opportunity to grow your hard-earned money.