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Yeah. You read that right. I contribute fully to my Public Provident Fund (PPF) account each year. And in the very first week of April.
Here’s why I do it?
- The contribution, interest earned, and payout are Exempt, Exempt, and Exempt (EEE) from Income Tax — and I don’t foresee this changing despite all the hullabaloo. EEE @ 8% compounded is pure magic. When you don’t want to trade your time for money, your Public Provident Fund will be your pillar.
- The [remaining] tenure is a perfect match for my goal for
financial independencefinancial freedom (given my new insights). It didn’t start with this goal, but it will end with this goal. As I recently read, you should ask someone 10-years older than you for financial advise. I didn’t, but maybe you can take a leaf out of my book.
- I’d seen my parents do this. Now I know why they did this. As a reader once commented, “there’s a lot to be learned from the fixed deposit generation.”
Here’s how I do it?
- It’s a short-term goal for me and one that’s become a long-term financial habit. I diligently set aside a fixed sum each month from my salary (right now as a cash balance in my single source of financial truth but I’m planning to switch to a one-year Recurring Deposit instead) from April to March each year.
- In the first week of each April, I withdraw the accumulated cash and make a deposit into my Public Provident Fund account. (When I switch to the Recurring Deposit mode of savings, the Recurring Deposit would automatically mature and convert to liquid cash in the beginning of each April. I’d get to pocket the additional interest earned.)
- I don’t do this just for the sake of Section 80C.
That explains my approach to the Public Provident Fund.
What’s your approach?
Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.