April 1 New Financial Year: Rs.1.5 Lakh PPF Investment Still Worth It?

Today marks the start of the new financial year, prompting you to strategize your investments and establish a comprehensive financial plan for the remainder of the year. Investing for the future is always advisable, and with the new tax regime, salaried employees can save more money than in the old regime. As a result, investment opportunities can also increase. Let us try to understand if investing a lump sum amount in PPF is ideal or not.

To put it succinctly, investing Rs. 1.5 lakh before the 5th of April each financial year was never a sensible decision. Most taxpayers will prefer the new tax regime; no 80C instrument makes sense anymore unless your investment is goal-oriented.

Never make an investment solely to reduce the tax burden. Every investment must be goal-based. The goal should determine the risk you need to take, and the risk level determines the asset allocation (how much to invest in equity and fixed income).

PPF investments have a minimum holding period of 15 years; they should never be the most dominant weight in any portfolio. Equity should usually account for 50-70%.

If the goal is retirement, the rest should either be NPS or EPF. This is one of the reasons why most taxpayers will give limited space to PPF in their investment portfolio.

If you are rushing to invest Rs.1.5 lakh in PPF before the 5th of April to earn interest on the entire amount for the entire fiscal year, it is not ideal because it will make most portfolios too heavy on fixed income. Maximizing your investments in PPF eliminates the opportunity to outpace inflation if fixed income is a dominant component in our long-term portfolios.

Even though your savings will likely increase, your future expenses will probably grow faster. It's akin to participating in a race with a predetermined outcome: guaranteed failure.