Simple and Compound interest 

Long Term Deposit Schemes of Public Provident Fund

Public Provident Fund:

These are long term deposit schemes which provide safety and an attractive interest rates, ranging from 8-9%. You can invest a minimum of Rs500 and a maximum of Rs1,50,000 in a year. You also get benefits over several facilities like loans, withdrawals, and account extensions. These provide some of the best returns in the industry and also provide benefits against taxes.

Public Provident Fund (PPF) is one of the safest investment options, but at the same time, it comes with a lock-in period of 15 years. Putting money in PPF can help the salaried individuals to ensure that they can’t use that fund for short-term needs. PPF investment can be useful to meet the long-term requirements such as marriage, child education or buying a home, etc. The present interest rate on PPF is 7.6% which is a tax-free return. PPF also helps the salaried individual to reduce the tax liability by getting a deduction U/s 80 (C).

Public Provident Fund (PPF) comes with a fixed interest rate for each year, which is pegged to prevailing government bond yields. With an upper limit of Rs.1,50,000 per year, it is meant to inculcate small saving habits. The investment amount is locked-in for 15 years and is eligible for tax saving deduction under 80C. Current rate of interest on PPF is 8% per annum. EPF is similar to PPF.

The positives: With a long lock-in period, PPF ensures that you put aside some money for the long term. Apart from being eligible for tax deductions, the interest on PPF is also tax-free.

The negatives: Being a debt product, its returns are limited and even investing the maximum amount each year may not be enough for your retirement corpus.

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