Small savings rates are linked to the government bond yields in the secondary market. PPF rates have progressively come down in the past two years, mirroring the decline in bond yields. The PPF rate was cut recently by 20 basis points and could fall further in the coming months. Despite the rate cut, advisers say the PPF remains a good bet because the interest is tax free. The tax-free status of the PPF gives it a distinct advantage over fixed deposits. The interest from fixed deposits is fully taxable, which brings down the returns to barely 5% in the highest bracket.
PPF rates have steadily come down in past few years
On the other hand, since consumer inflation is below 4%, the PPF offers a healthy real return of more than 3%. "This is quite impressive for an option that offers assured returns. Investors should continue to take advantage of this long-term tax-free product
Besides the returns and taxability, the PPF scores high on safety, flexibility and ease of investment. An account can be opened in a Post Office branch or designated branches of PSU banks. Some private banks also offer the facility to invest in the PPF. Opt for a bank that allows online access to the PPF account. Deposits can be made throughout the year, but an investor must deposit at least Rs 500 in a year.
However, there is a better alternative available to salaried taxpayers covered by the Employees' Provident Fund. Although an individual's contribution to the EPF is linked to the salary, one can opt for the Voluntary Provident Fund (VPF). The VPF offers a higher rate (8.65% for 2016-17) compared to the PPF and contributions are eligible for the same tax benefits. But this option can be exercised only at the beginning of the financial year or in October.
Smart tip:Invest through a bank that allows online access and investment in the PPF account.
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1. What is a straddle? A strategy using Nifty options usually before a major event or when one is uncertain of market direction. Comprises purchase of a Nifty call and put option of the same strike price. Usually strikes are purchased closer to the level of the underlying index. 2. What is better buying or selling a straddle? It depends.Implied volatili ty of options, or near-term expectations of price swings in an un derlier like Nifty , usually peaks before an event and falls when the outcome plays out like Infy re sults in past years. However, once the event plays out, a sharp rise or fall in Nifty could result in price of the straddle rising benefiting buy ers. But, normally , those who sell or write options charge hefty premiums from buyers in the hope that fall in volatility would ensure the options end out-of-the-money, hurting buyers. 3. So, do straddle sellers end up winning most of the time? Yes. That's invariably the case when market volatility is trending on the...
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Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...
