Advantages and Disadvantages of PPF

PPF is one investment option which almost every salaried person or businessmen consider when one makes his or her investment plan. Given below are some of the advantages and disadvantages of PPF –

Advantages of PPF

1. It provides tax free returns because there is no tax on interest income which one derives from this PPF which is the case with fixed deposit.
2. It provides good return in the range of 8 to 9 percent and since it is government backed scheme it is very safe investment as compared to equity.
3. This can be started with minimum amount of 500 rupees and therefore even people who are in lower income group can also start it.
4. It can be opened in the name of minor along with guardian and if child is above 18 years of age then no guardian is needed therefore an individual who has having 2 adult children can open 4 accounts, 1 in name of himself, 1 in the name of his wife and other 2 in name of his children.

Disadvantages of PPF

1. Since there is lock in period of 15 years one cannot invest the money if he or she has liquidity problem because this funds are locked in for a long period of time.
2. Maximum investment which one can made in this is limited to 100000 rupees, therefore one has to plan his or her investment accordingly, because suppose you sold some land for 5 Lakh rupees and want to put that money into PPF than  you cannot do that as maximum limit is 100000 lakh rupees only .
3. One cannot close his or her account prematurely (except in case of death) which results in lower flexibility as compared to SIP or FD where you can close it whenever you want.