Interest rate: 7.8% Tenure: 15 years (from first investment)

The PPF is the favourite of risk-averse investors who are content with modest but assured returns. Its tax-free status gives it a distinct advantage over fixed deposits. Since interest from fixed deposits is fully taxable, the returns from a 7.5% bank deposit are reduced to barely 5.25% in the highest tax bracket. The only glitch is that there is a cap of `1.5 lakh on the annual investment by an individual.

The best part about the PPF is its longevity. The account has a tenure of 15 years, but can be extended in blocks of five years indefinitely. After 15 years, the investor has three options: withdraw the corpus, continue with the account without further contributions or continue investing in the account. If you choose to continue investing in it, you have to submit an application for extending the account tenure for a block of five years. The application (Form H) has to be submitted within a year from the maturity date. After five years, the account tenure can be further extended for another five years.

If one doesn't submit an application for tenure extension, the PPF account tenure automatically gets extended but the investor cannot make further contributions to it. The balance in the account will continue to earn interest, but the investor will no longer be required to contribute the minimum `500 in the account every year. Once this option of continuing without contribution has been selected, the subscriber cannot alter it to make further contributions to the account.

The PPF suits non-salaried people who are not eligible for retiral benefits. Self-employed professionals such as doctors, architects and chartered accountants should use it to build the debt portion of their retirement nest egg.

Not everybody is a fan of the PPF. If you are young and looking to save tax, the PPF is not a great option. Other tax saving instruments such as ELSS funds have given far higher returns . Both of us contribute to the Provident Fund so there's no need to invest more in debt. Instead, they have pure protection insurance policies and SIPs in ELSS funds to save tax.

Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich

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