Advantage of Public Provident Fund Account

The main advantage of Public Provident Fund is safety of fund. The scheme is governed by the Public Provident Fund act 1968,  an act of Indian parliament, hence make it one of the safest savings instrument available in the market.

PPF also provide double tax benefit. You can claim tax rebate under section 80C of Income Tax Act to the tune of your investment in PPF in a financial year. At present the tax benefit under Section 80C of IT Act is 150,000/-. The interest earned in your PPF account is also tax free. So by investing or savings in PPF Account you are eligible for double tax benefit.

PPF also provides great returns at present the rate of interest is8.1% compounded annually. Now the government announces the rate quarterly previously it was once a year.
With PPF you can enjoy the Flexibility and freedom of Investment. You can invest as low as Rs. 500/- to keep the account running and upto Rs.1,50,000 in a financial year. You can also have the freedom of investing in PPF through a systemic investment plan.
The Corpus accumulated under PPF is exempt from all types of Wealth Taxes.

Disadvantages of Public Provident Fund (PPF) Account

The main disadvantage of Public Provident Fund account is its liquidity and long lock in period. This scheme is for long term investors who dont bother about liquidity. If you invested in PPF, our money is stuck for years on end. It is not as easy as selling some shares or mutual fund units.
You can make a partial withdrawal only after five financial years are completed from the end of the year in which the initial subscription was made. So, in effect, it works out from the seventh year onwards.
The amount of withdrawal is limited to 50% of the balance in your account at the end of the fourth year immediately preceding the year in which the amount is to be withdrawn; or at the end of the preceding year, whichever is lower.
You can also take loan against PPF account from the third year of opening your account to the sixth year.

Another disadvantage of PPF account is the changing rate of interest. Over the years, the rate of interest in this scheme reduced to as low as 8.1% from as high as 17% per annum.