Invest in Credit Risk Mutual Fund or not?

Of all the safe savings instruments available to the common man, Public Provident Fund, National Pension Scheme, Sukanya Samriddhi Yojona must rank among the top. The money is secure and the investor gets tax benefits too.

While contributions to these schemes can be annual, quarterly or monthly many opt for the latter since accumulating money for one-time annual payment may not be possible for all.

But due to busy schedules many miss the outer time limits to contribute. And these accounts might turn inactive due to non-payment.

There are ways to turn an inactive account active again.

Public Provident Fund (PPF)

In a fiscal year, the minimum contribution to a PPF account is Rs 500. The deadline to make a contribution for any fiscal year is March 31 of that year.

The account would be considered as inactive if the minimum contribution is not made during the financial year.

Until the account is reactivated, one cannot withdraw (partial) money from the PPF account.

You can activate the account only after making a minimum contribution of Rs 500 for the year that went by and Rs 50 penalty.

PPF pays 7.1% returns annually and the principal, interest earned and maturity amount are entirely tax free.

National Pension System (NPS)

When subscribing to NPS, one is required to make a minimum contribution in every fiscal year. According to existing regulations, NPS Tier I account allows a minimum contribution of Rs 1,000 in a financial year to keep the account functioning.

If you fail to make the minimum contribution towards your NPS account, it will become inactive.

To reactivate your NPS account, you will be required to pay a penalty of Rs 100 per year, as well as make the minimum contributions per year for each defaulted year.

For reactivating the NPS account, Point-of-Presence charges will be applied.

Even though Tier II has no minimum contribution requirements, if the Tier I account is frozen, the Tier II account will be frozen as well if any.

NPS is a voluntary pension fund which is regulated by the Pension Fund Regulatory and Development Authority of India. An individual can start with a minimum contribution of Rs 6,000 in a financial year.

NPS is basically an annuity plan and the interest is compounded annually. Generally it gives a return between 9% and 11% depending on the duration of the investment.

Sukanya Samriddhi Yojana (SSY)

A minimum deposit of Rs 250 is required per financial year to keep the SSY account active.

The account would be considered as an inactive or frozen account if the minimum contribution is not made in a fiscal year.

A dormant account can be reactivated at any time before the 15-year lock in period from the date it was opened.

You will be required to make a minimum deposit of Rs 250, as well as a penalty of Rs 50 for each defaulted year, to get the account reactivated.

Currently, Sukanya Samriddhi Yojana offers an interest rate of 7.6% compounded annually. The account can be opened by the parent of a girl child below 10. The tenure is of 21 years or until the girl gets married after the age of 18 years.