Tax-Free Bonds VS PPF: What Can Be a Better Plan?
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Both the bonds typically offer fixed interest rates but Tax-Free Bonds’ interest rates are often higher than those of PPF.
Returns:
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Tax-Free Bonds: The interest income from tax-free bonds is exempt from income tax. This can be advantageous for individuals in higher tax brackets.
Tax Benefits:
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Not only is the interest earned on PPF tax-free, but the contributions made to PPF also qualify for tax deductions under Section 80C of the Income Tax Act.
PPF Tax Benefits:
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Tax-Free Bonds: Tax-free bonds typically have a fixed tenure, and premature withdrawal may result in penalties. They are relatively less liquid compared to PPF.
Liquidity:
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PPF accounts have a lock-in period of 15 years, but partial withdrawals are allowed from the 7th year onward. This provides some liquidity compared to tax-free bonds.
Liquidity, PPF:
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Tax-Free Bonds: These bonds are issued by government-backed entities or public sector companies, making them relatively safe investments.
Safety:
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PPF accounts are backed by the government of India and are considered one of the safest investment options.
PPF Safety:
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Tax-Free Bonds: There is usually no upper limit for investment in tax-free bonds, allowing individuals to invest as per their financial capacity.
Investment Limit:
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The maximum annual contribution to a PPF account is capped at a specific limit, which is set by the government and subject to change.
Investment Limit PPF: