Have you been investing in PPF (Public Provident Fund) all along? Well I have got a surprising news for you. The investment which you thought all along as the most prudent choice, may just rob you of the chance to make an extra 16 lakhs. Please read on if you want to know how.

Consider the scenario that you would be investing in the Public Provident Fund for the next 15 years and you would invest the maximum amount of Rs 1.5 Lakhs per annum. The Interest Rate has been considered at 7.8%. Your net invested amount at the end of 15 years would be Rs 22.5 lakhs , and post 15 years the amount would grow to a little over Rs.46.7 lakhs. The same amount if invested in ELSS with a monthly SIP (Systematic Investment Plan) of Rs. 12500 will appreciate to an amount of just over Rs. 52.24 Lakh considering very conservative return estimates of 10%. Consider a more realistic rate of return of 12%, the same amount would appreciate to Rs 63 Lakhs, a cool 16+ lakh more than the PPF return. Further with time the PPF rates will continue to diminish substantially meaning the chasm between PPF and ELSS (Equity Linked Savings Scheme) returns can only widen going forward.Here it is imperative to mention that both PPF and ELSS offer tax exemptions under Sections 80C of the Indian Income Tax Act.

You may call these as mere projections, but consider this, an investment of the max amount in PPF over the last 15 years at actual rates of return has led to an under-recovery of more than 60 lakh rupees compared to an investment in ELSS. The calculations for these are all available over the internet. Check out these if you find the numbers hard to believe and a fallacy.

Also the lock in period of 15 years in PPF also compares unfavourably to a maximum lock in period of 3 years in ELSS.

However, there is a major risk associated now with investing in ELSS, and it is that the markets are currently at life time highs and returns are thus expected to be muted for some time going forward. However, this risk is substantially mitigated by adopting the SIP Approach. Also, ELSS being an equity linked instrument is subjected to the vagaries of markets and is thus inherently risky.

So friends consider the above facts and take an informed decision whether investment in PPF would be something you would want to pursue over investing in ELSS products.

Arbind Kumar Roy

About Arbind Kumar Roy

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