Reason 1: You struggle with cash flows.
The minimum investment is Rs 500/annum and it can go up to a maximum Rs 1.50 lakh, which is the limit under Section 80C. The amount does not have to be invested at one go but can be done over maximum 12 installments in a year. If you struggle with cash flows, this aspect takes care of it.
Reason 2: You want to save tax.
Investments in PPF are entitled to a tax exemption up to Rs 1,50,000. What’s more, even the interest earned is tax free. The interest is added to the principal investment and compounded, and the accumulated amount is also exempt from tax on maturity.
So it's tax-free interest combined with a tax break.
Reason 3: You want an assured return.
The return is assured but flexible. You are promised a fixed return every year, though the exact figure fluctuates annually. From 12% per annum, it got lowered to 8%. The returns are reset every fiscal year and fixed by the government. Going forward, they will be recalibrated on a quarterly basis. The current rate for PPF is 8.7%.
Reason 4: You give safety paramount importance.
Any sovereign backed investment (which means it is issued by the national government of a country) stands for the highest safety. Since the funds in PPF are backed by the central government, the investment does not get any safer than this because the government will not default in its payment.
Moreover, the amount in a PPF account cannot be attached under any court order with respect to any debt or liability of the account holder.
While it was given to understand that the Income Tax authorities can attach the account for recovering tax dues, the court has ruled otherwise. (Source: Taxguru.com, Tax blog, Taxvani.com)
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