PSA for PPF investors: Invest INR 1.5L before April 5th to avail maximum interest for the FY.

[iarunner]

@kiterider Yes that i know. But there's a limit to invest in ppf as well. I can't invest more than 1.5 L

 

[usernameless]

@iarunner Decide on a equity-to-debt allocation. Once that is fixed, decide if you can spare 1.5 LPA to put away into your PPF account and whether this amount fits your debt allocation.

If it does, then PPF is one of the best debt instruments to invest in;

• Large lock in, good for discipline, and when you are young.
• Lock in and best possible return rate means superb compounding effect (I don't have to tell you this the 10L you already have is proof enough)
• The returns, are completely exempt of tax.

TLDR: If you can save up to invest in PPF without reducing your equity investments, then the rule of thumb is to continue (that is, if it fits your debt allocation)

 

[consolatio]

@usernameless What if I already have a big amount in FDs as debt? Does it still make sense to invest in PPF over ELSS for 80C?

 

[usernameless]

@consolatio You are mixing two different asset classes just because they give you tax benefits. Keep aside the 80C benefit for a while and think of your investments outside of that context, your eventual aim is to have an asset allocation (debt and equity) that you are comfortable with, and a decent inflation beating return.

Out of this, when you look at your debt allocation, PPF is one of the best instruments to get best possible returns in the debt category. When you compare PPF vs FDs, also, PPF is better from a returns perspective, not so much from the lock in perspective. If a person in your position is OK with the PPF lock in period, one could reduce one's future FD investment and divert those funds to PPF OR one could break the FDs and move the funds to PPF (or move them on maturity).

Coming to ELSS - I started with ELSS early on but stopped investing because I am not comfortable with the lock in for ELSS. Also, there is no other instrument equivalent to the risk and returns profile of PPF, but for ELSS, you can find non-ELSS large cap funds that have similar portfolio (and no lock in) so I went with an Index fund that will give me returns in the similar range without the lock in associated with ELSS. I personally am OK with the PPF lock in because PPF is close to sovereign guarantee, I am not OK with ELSS lock in because ELSS is market linked.

The whole point is look outside the 80C, your investment is for the next 10-20-30 years and tax saving is a very small part of that. Do not let tax breaks/rebates decide your investment allocation. One should decide their own allocation and then try to accommodate for tax rebates.

When the new tax regime kicks in - you are not going to get 80C benefit in the future anyway.

Note: I am just making a point, this is how I have structured my financial decisions. This is not financial advice.

 

[luke2017]

@iarunner Can you tell me how ppf lock in works if one invest in it each year for say 10 years?

 

[iarunner]

@luke2017 Ppf locking itself is minimum 15 years

 

[luke2017]

@iarunner So if I put in 1 lakh this year.. the lock in for that will be 15 years... What about the 1 lakh I put in next year? Will it be locked in for the next 15 years?

 

[sandis]

@luke2017 https://preview.redd.it/ayb7p1rzi3s...bp&s=1c51190620961dbb2184d4901fb0213ccfd1bab8

 

[lapidoth]

@iarunner +3 years voluntary right if you want.

 

[suzanne126]

@jossystephan My ppf account is already mature. Can I keep putting money in it whole life , or does it have to be closed / renewed at some point?

 

[coldcatsoup]

@suzanne126 You can extend ppf for a block of 5 years after 15 year lock in is completed.

 

[diagon]

@coldcatsoup Hi, is there any limit to how many times we can extend the ppf?

 

[seal87]

@diagon No limits. You can keep extending

 

[jerrymyers]

@diagon Twice. From the initial 15 years you can extend it twice for a block of 5 years. So 25 years in total.

 

[coldcatsoup]

@jerrymyers That's wrong info.

Pretty sure it can be extended indefinitely for a block of 5 years.

 

[sandis]

@coldcatsoup +1

 

[suzanne126]

@coldcatsoup Okay thank you. (I opened 2 ppf accounts by mistake once , and it was a nightmare closing the other. The bank didn't refund any interest)

 

[304]

@jossystephan Just invested 1.5 l in ppf 10 mins back. Feels good man

 

[joey13]

@304 This might be a noob question. But both EPF and PPF are under 80C. Why would you invest all of 1.5L in PPF when your EPF is already getting filled. Irrespective of how much you invest only 1.5L can be tax deductible, right ?

 

[304]

@joey13 That's a good question considering you are a beginner. Once your salary reaches a basic threshold , investment is not only focused on tax saving. It turns into actual investment for future. With still a reasonable interest rate, safety , tax exempt status and compounding for many years , this 1.5 lakh every year becomes a handsome amount down the line.