In the host of investment vehicles available in the market, the Public Provident Fund is one of the most trusted and sought after. It is ideal to list down the advantages and disadvantages before embarking on any journey – be it a holiday, financial or life itself! It allows you to make an informed choice. Here we will list the pros and cons of PPF for you.

Advantages of PPF account –

1. Low Risk – As PPF is supported by the Government, the principal and returns are secure and guaranteed.
2. Habitual Saving – PPF was first introduced in 1968 to encourage savings with a return attached to it. It inculcates the habit of savings and also with an interest rate higher than Fixed Deposits. The interest rate is set by the Finance Minister and the current rate is 7.1% p.a.
3. Tax Benefit – The principal amount invested is exempt from tax under Section 80C of the Income Tax Act of 1961. Subsequently the interest earned is also tax exempted. This feature makes it an attractive investment option.
4. Ease of Opening the Account – PPF account can be opened at post offices, Nationalised Banks and a few Private Banks as well. It can be opened at as less at Rs. 500 and can be done by depositing cash, cheque or online transfer.
5. Tenure – The Account has a lock-in period of 15 years which can be extended in a block of 5 years. This is an advantage to people who have a tendency of breaking their investments. This will ensure that the savings are intact for 15 years.
6. Account Continuance – The Account can be maintained after the end of the tenure without making any additional contribution.
7. PPF Eligibility – Any Indian Citizen above the age of 18 years can open a PPF account. You can open a PPF account for a minor child and maintain it. But grandparents are not allowed to open PPF accounts in the name of their grandchildren.
8. Loan – One of the major advantages of PPF accounts is that you can request a loan against this investment between the 3^rd and 5^th year. A second loan can be applied for after the 6^th year provided the first loan is repaid.

Disadvantages of PPF account –

1. Investment Cap – Unlike other investment vehicles, PPF allows you to invest only up to Rs. 1.5 Lakhs. So if you are looking to invest a large amount to create a corpus, then this isn’t the right option for you.
2. Tenure – There is a lock in period of 15 years and even partial withdrawal isn’t allowed until after the first 6 years. So, if you are looking at a short term investment plan, then this will definitely not fall into that category.
3. Ownership of Account – This is a single holder account, joint accounts are not allowed like other investment options like Fixed Deposits or Mutual Funds.
4. Withdrawal Options – If you are looking for immediate liquidity, then this isn’t what you should invest in. Partial withdrawal is allowed only after a period of 6 years and only 50% of the account balance at the end of the previous year.
5. NRI & HUF cannot open a PPF account in India. NRIs can continue to operate a PPF account opened earlier when he/she was a citizen of India.

PPF account is more suited for someone who has a low risk tolerance, expects guaranteed returns and isn’t keen on venturing into the market-linked investment options.