I have been working for over 15 years. I will soon be moving to France for four years with a new job. Can I keep my PF account active and will the interest keep accumulating? If I withdraw the PF corpus and put it in PPF/post office, what will be the tax implications?

Jayant R. Pai, CFP and Head – Products, PPFAS Mutual Fund replies, “According to current rules, a PF account becomes inoperative if the employee does not apply for withdrawal of accumulated balance within 36 months of retiring after attaining the age of 55 years. Therefore, even after leaving one company, the PF account continues to earn interest and is not termed inoperative till such a situation rises at age 55. However, during the period contributions don’t get credited to the PF account, the interest rate earned does not remain tax-free. NRIs are not permitted to open a PPF account. However, in case you do so while you still are a Resident Indian, you will not be permitted to make fresh contributions once your status changes. The account, however, will remain in force until it matures.”

We are a working couple with two children aged 5 and 7. We live in a joint family. I want to invest for my children. I am servicing a personal loan of around Rs 5.5 lakh but I can save Rs 10,000 a month. How should I invest this amount?

Adhil Shetty, CEO, BankBazaar replies, “The first step is to identify your child-centric goals and plan your investments around it. For instance, you will need funds around the time your children complete school and start college. Again you will need money for their higher studies. These are long-term plans. The mid- to short-term goals will include money for boarding school or cocurricular activities. Keep inflation in mind when you decide on your corpus. While an inflation rate of 6-7% works in most cases, for education, it would be wise to consider a higher inflation rate of around 8-10%. Equity funds help tide over shortterm market fluctuations and is the best way to beat inflation over the long term. An SIP in a diversified equity fund will help meet the financial goals for your children. If you are less risk averse, consider balanced funds that provide lower returns but are less risky. If you are looking at options other than mutual funds, you can opt for a 15-year PPF to build a corpus for your child’s education. The current interest rate is 7.9%. You can also consider the Sukanya Samridhi Scheme for your daughter. Along with investments, get adequate life insurance cover. Calculate your required cover taking into account your existing liabilities and financial goals, including your children’s education. This will ensure your family is financially secure in case of eventualities.”

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