InvestorQ : What are the other options available similar to PPF and which is the best?
Tanu Shukla made post

What are the other options available similar to PPF and which is the best?

Answer
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Anisha Awate answered.
5 months ago


The rate of return under PPF has been slashed and investors are looking for options that will fetch better returns. So, the below-mentioned are your available options. However, every option has its own repercussions.
1)Senior-Citizen Savings Scheme: Any fresh deposit to the scheme shall be opened at 7.4% only but any interest received thereon shall be taxable in the hands of the investor. Therefore, those in higher tax brackets will not be able to get more than PPF.

2)Debt Mutual funds: Even though the return on debt funds is somewhat similar to the PPF investment, they also have some risk associated. One has a lot of options and it is always confusing to choose the right fund and is a difficult task. Therefore, one needs to select the right fund which is best suitable to them.
Under debt mutual funds, it is not wise to go just by returns and one could end up losing some serious money. Future Returns of PPF with past 1-year returns of a credit risk fund are not even comparable. So, if you want a risk-free option, PPF is best.

3)Bank Fixed deposits: Bank FD rates have also gone down since the RBI has announced a repo rate cut in the last week of March. FD rates range from 5.5% to 6.25% p.a. Also, any interest received shall also be taxable.

4)Government Securities: One can invest directly in Government bonds even through non-competitive bidding. However, returns would not be higher than the PPF and even the interest received is taxable.

5)Annuity Plans: Annuity Plans from insurance companies can provide higher income if one is closer to or above 70 years but it won’t work for young investors.

6)Tax-free bonds: As it is clear from the name that the bonds are tax-free. However, returns stand between 5.5% to 5.75%, therefore, PPF has better and attractive returns.