PPF is a term used to describe a government-offered, fully secured investment program. PPF has a long lock period of 15 years, after which the account holder may choose to extend it for an additional 5 years. The amount invested, the interest earned, and the total maturity amount are all tax-free, making it a highly strong tax-advantaged instrument.
The Public Provident Fund is a reliable savings plan that may be used to build up a sizable collection of savings over time. However, just like any other savings or investment plan, PPF has some drawbacks that you should be aware of before investing. Below mentioned are the drawbacks to be examined.
Long Lock Duration
The public provident funds account completely matures in 15 years. The PPF scheme is best suited for individuals who wish to invest their money for a very very long duration of time. People looking for short-term investments should look for other options.
Strict Rules For Withdrawal
There are many strict restrictions for withdrawing money from your PPF account before maturity. A person is only allowed to withdraw money one time during a financial year and also only after 5 years of account opening, excluding the year of your account opening.
Lower Interest Rate
The current interest rate for PPF is 7.1%. And this rate of interest hasn’t increased for many years. Most banks are providing higher interest rates on fixed deposits which is 8% to 9%. PPF has a lower rate of interest than EPF. The Voluntary Provident Fund is considered a great option for salaried employees as it also provides a high-interest rate.
Fixed Deposit Limit
A person can only invest a maximum of Rs 1.5 lakh in their PPF account and this limit is not yet increased by the government for the past many years. VPF is a great option for people who are ready to invest higher amounts of up to Rs 2.5 lakh without any additional tax.
Premature Closure Not Permitted
You are not allowed to close your PPF account at an early stage. You are only allowed to close your PPF account after 5 years of opening your account and which also comes with several conditions, which are mentioned below:
- The life-threatening disease of the PPF account holder, children, or spouse.
- For higher education of the children or the account holder.
- If the account holder changes his/her resident status and becomes an NRI.
NRI Are Not Allowed To Open The Account
NRIs are restricted from opening their PPF account. If a person has his/her PPF account when he/she was a citizen of India then he can enjoy the benefits of a PPF account.
HUF and Trusts Are Not Allowed To Open PPF Accounts
Previously HUF and all the trust accounts were allowed to open their PPF account and now they are restricted from using this facility.
Online Facility Of PPF Account
The person can easily open up their PPF account from banks or post offices. Banks allow their customers for providing an online facility for their accounts but this facility is not yet available in the post offices.
