What proportion of your investments are tucked away in fixed income securities like bond or debt funds? Bank fixed deposits? While these investment avenues may be good options but do you consider what you put away in your PPF account in this category?
All the time our financial advisers will sell us equity funds, debt fund or ULIPs, but what none of them will recommend is your PPF account, yet this is possibly the best fixed income vehicle that is available in India. The only time PPF is considered is for its tax benefits. But is that tax benefit the only reason to invest in PPF.
Simply, a PPF is an account where you get a tax benefit on investment, tax free returns of 8% (as of now), and any cash you take out is fully tax free. Most people will look at only the first component, and ignore the other two.
Here is what you should be doing: try to use up your 1 lakh limit for EPF and insurance first. The tax benefits from your PPF account will accrue over the years and may even outstrip any bond, fixed deposit or debt fund. This is because the 8% you get is tax free, unlike any returns from other places. And of course, Bharat Sarkar ensures the safety of your investment.