PPF (Public Provident Fund) received the consensus of major Personal Finance experts due to its unique benefits. Even-though it offers incomparable benefits, some hidden losses also there. I am furnishing five losses, which may not applicable to all but someone may affect.
1.Decreasing Interest rates: For first 49 years (1952 to 2001) PPF Interest rates are increased gradually. But now a days no one can predict about PPF Interest rates, because of fluctuations. You can read more about .
2.Discontinuation of Deceased Account: Rules permit only one PPF Account per Family. Generally PPF Accounts are opened on the names of earners to show tax exemption. PPF Account is backbone to many family personal finances. Many goals like Children education, Marriage, House construction etc. rely on this. If anything happens to the earner on whose name PPF Account exists that account should be closed in middle. All amount exist in that account will be handed over to the Nominee. What about the crucial family goals linked with that account? Will Government will not take any responsibility on that? Even if fresh account is opened it will take much time to accumulate the required money. Why not the existing account continuable on nominees name. Any way Nominee will continue the subscriptions if he/she wants, what is the loss to the Government? If this option is available the same account will be continued and the actual purpose of that family will be served.
3.No Insurance on PPF Account: Minimum 15 years one has to invest in PPF. So obviously it is one of the Important Financial Source for a Family. What happens if any risk happens to the PPF holder. Surely the goals connected to PPF will be effected. It is good idea if Government or any other Insurance Provider offers insurance on PPF. Like Loan Insurance all the PPF Subscriptions will be paid by the Government or Insurance Company. Average Subscription amount or Subscription amount on which PPF holder insured can be continued till the maturity.
4.Non Increase in 80(C) Limit: Presently upto One Lakh Subscriptions per Financial Year is allowed to claim Tax Exemption for PPF. 80(C) limit is also One Lakh which includes Insurance, EPF, GPF etc. If PPF Subscriber makes One Lakh Contribution towards PPF he
could not able to claim the Tax Exemption on remaining saving schemes such as Insurance, EPF. In view of this it is useful to increase the limit of 80(C) limit to at-least Two
5.No Protection against EEE Tax Exemption: In view of DTC (Direct Tax Code) Personal Finance experts expressing that if DTC come into force E-E-E of PPF become E-E-T. As you know E-E-E means Exemption on Investments, Exemption on Interest, Exemption on Maturity. E-E-T means Exemption on Investments, Exemption on Interest, Tax on Maturity. So at the time of maturity Investor need to pay the Tax when DTC comes into force. It is not clear that when DTC will come into force. Government can avoid EET in the interest of public welfare and encouragement on savings.
Personally i like PPF very much. I believe that it is the powerful weapon in Personal Finance arms of a Common Man. My intention is it should remain so and serve the purpose why it is opened. Any unwanted situation should not disturb the purpose. You are welcome to share your views on this article , as well as any flaws that you find in PPF through your valuable comments.