Is investing money your New Year resolution? Why PPF is the best scheme available

2018 is almost over and a new year awaits all. This is the time to look at what was achieved in the last 12 months and what more could have been done. Also, this is the time to set new targets for the next year. If making money is your goal, New Year 2019 might just be the right time to start. While the aggressive investors can look at equity-linked schemes to generate gains, some of the best options for people looking at safe returns include fixed deposits (FDs), recurring deposits and public provident fund (PPF). 

Tax expert Sunil Garg believes that despite so many alternatives in the market, public provident fund (PPF) remains the best possible scheme. "PPF is the best possible scheme out there. It is considered as the safest investment scheme," he told Zee Business Online. 

What is Public Provident Fund (PPF)?

The Public Provident Fund Scheme was started by the National Savings Organisation in 1968. It was introduced to promote small savings and investments. The scheme comes with an attractive interest rate of 8% by the Central Government. Also, this rate is compounded annually and the interest is paid on March 31 every year.

Why is it the best investment option?

Garg explains that PPF offers a high rate of interest and is also tax free. The scheme comes under the exempt, exempt, exempt (EEE) category of tax status. This means that returns, maturity amount and interest income are exempt from income tax. "The money invested also gives tax benefits under 80C, the interest is also tax free and the amount withdrawn is also tax free," Garg said.

However, he added that the only issue could be the lock-in period of 15 years. "Your amount gets mature only after this period. But again, the investors get a fixed return of 8% which makes their investment safe," he said. 

#EditorsTake | #DonaldTrump और #XiJinping के बीच फोन पर हुई बात का क्या मायने निकालना चाहिए, क्या #TradeWar की चिंता कम हुई समझते हैं अनिल सिंघवी से। @AnilSinghviZEE @dkalra81 pic.twitter.com/0zbRnpXjfx

— Zee Business (@ZeeBusiness) December 31, 2018

PPF vs equity-linked schemes

Garg said that if an investor is looking for a short-term goal, money could be invested through SIPs. However, there would be more risk involved. "In case you need the money after three years, you can invest through SIPs. Obviously, where equity markets are involved, you will get higher returns but the risk involved will also be more. Wherever the interest is fixed, the risk is less," he said.

The smart way to go about investments in New Year would be to maintain a balanced portfolio. 

"We advice investors to maintain a mixed portfolio which should involve some debt bonds, a few government backed options....invest in PPF, and thereafter, if you have money left, put it in equities or debt,," he added.