Key Benefits of Investing in PPF

Posted in Investment Tips By Sajhyadri Chattopadhyay -
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Investing wisely is a cornerstone of financial security, and for Indians, the right choice can make all the difference. One such avenue that stands out is the Public Provident Fund (PPF). With this blog, you can unravel the myriad benefits that make PPF a game-changer for the average Indian investor. From the safety net it provides to the attractive tax benefits, explore why PPF is not just an investment, but a strategic wealth-building tool tailored for you. Could PPF be the guardian angel your finances need? 

Safety and Stability of PPF

When it comes to securing your hard-earned money, the government-backed Public Provident Fund (PPF) stands as a beacon of financial stability. Over the years, PPF has demonstrated unwavering reliability, making it a safe harbour for Indian investors. Since its inception in 1968, not a single investor has lost their principal amount. During the economic downturn of 2008, PPF continued to provide a stable return of around 8%, showcasing its resilience. Over the last decade, the average annual return has consistently outperformed inflation, safeguarding the real value of investors' money. This track record positions PPF as a secure option, especially for the risk averse. 

Tax Benefits

The tax advantages that PPF offers are a key point of attraction for investors. PPF enjoys the coveted EEE status, meaning contributions, interest earned, and maturity amount are all exempt from taxes. If you invest the maximum allowed amount of ₹1.5 Lakhs in PPF annually, you can save up to the entire amount, irrespective of your tax slab. Over the years, this accumulates to a substantial amount in tax savings alone. Furthermore, the interest earned, which is tax-free, significantly boosts your overall returns. These substantial tax benefits make PPF a strategic tax-saving instrument for the prudent Indian investor. 

Attractive Interest Rates

In terms of investments, the interest rate plays a pivotal role, and PPF excels in this regard. As of the latest update, PPF offers an annual interest rate of 7.1%. To put this in perspective, let's compare it to the average inflation rate in India, which hovers around 4-6%. This means that the real return on your PPF investment is still greater, beating inflation and preserving your purchasing power. Over 15 years, a ₹1.5 Lakhs annual investment at this rate would yield over ₹40 Lakhs. For individuals aiming for steady and reliable returns, the consistent performance of PPF makes it a standout choice. 

Long-Term Wealth Creation

The journey toward wealth creation demands a combination of discipline and a robust investment strategy. Assuming a monthly contribution of ₹12,500 (the maximum allowed), after 15 years, you'd have invested ₹22.5 Lakhs. However, the compounding effect turns this into a substantial corpus, reaching approximately ₹40 Lakhs, assuming the current interest rate. This highlights the power of systematic contributions and the compounding effect of creating wealth. This disciplined approach ensures a financial snowball that grows steadily, providing a solid foundation for future financial goals. The numbers speak for themselves, with PPF not just preserving the value of money but amplifying it. 

Flexibility and Accessibility

In the dynamic world of personal finance, flexibility is a prized attribute, and PPF delivers just that. With PPF, you can start with as little as ₹500 per year, allowing you to tailor your contributions to your financial situation. Accessibility is equally crucial. With thousands of authorised branches across the country, including post offices and nationalized banks, managing your PPF account is convenient. This accessibility ensures that even if you relocate within the country, your PPF remains within reach, making it a versatile and user-friendly choice. The combination of flexibility and accessibility makes PPF a sound investment ally that adapts to your needs. 

Loan and Withdrawal Facilities

Life is unpredictable, and financial needs can arise unexpectedly. PPF understands this, offering loan facilities against your PPF balance. After five years of consistent contributions, you can avail a loan of up to 25% of your PPF balance. For instance, if your PPF balance is ₹5 Lakhs, you can secure a loan of ₹1.25 Lakhs. This unique feature provides a financial safety net without compromising the long-term growth of your investment. Additionally, partial withdrawals are allowed after the seventh year, offering liquidity for specific needs. This dual benefit of loan and withdrawal facilities adds a practical dimension to PPF making it a versatile choice. 

Compounding Effect

The magic of compounding transforms PPF from a conventional investment avenue to a wealth-building powerhouse. Imagine your contributions not just earning interest but also accumulating over time. Suppose you start with an initial investment of ₹1 Lakh and contribute ₹8,333 per month from the 2nd year. Then, after 15 years, your total contribution would be ₹15 Lakhs. However, thanks to the compounding effect, your PPF balance would be approximately ₹27 Lakhs. This demonstrates how the compounding snowball transforms consistent contributions into a substantial financial nest egg. It's the secret that propels it into the realm of superior choices for those aiming for long-term financial success. 


The multifaceted advantages of PPF make it the clear winner for middle-class investors. From its safety and tax benefits to flexibility, accessibility, and the compounding effect, PPF emerges as the strategic choice for those seeking long-term financial stability. Like PPFs, there are various other investment schemes for risk-averse investors. Fixed Deposits emerge as one such investment plan that offers handsome returns. Visit Bajaj Markets now to book an FD at up to 8.75% interest rate and tenures going up to 10 years. 

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