Public Provident Fund (PPF) scheme provides triple tax benefits to investors. Not only the invested amount in the PPF account (up to Rs 1.5 lakh/year) can be claimed as a deduction under Section 80C of the Income Tax Act but the interest earned and the amount withdrawn on maturity are also tax-free.
Although the PPF account matures in 15 years, investors are allowed to extend the account in blocks of 5 years and earn the applicable interest rate of the time. Using this feature of this very popular savings scheme, PPF accountholders can accumulate a large corpus of over Rs 1 crore during their working years.
PPF calculator shows that a monthly investment of Rs 9000 in the PPF account can grow to Rs 29.2 lakh in 15 years at the current 7.1% interest rate. Saving just Rs 300 per day would give an investor Rs 9000 at the end of the month to invest in the PPF account. However, salaried employees may be better off investing more amount in their VPF account instead of PPF (Read the reason here).
In 20 years, the total maturity amount from investing Rs 9000/month will be Rs 47.9 crore and Rs 74.2 crore in 25 years at 7.1% interest. In 30 years, if you continue to invest Rs 9000 per month, the maturity amount could become Rs 1.11 crore.
Also Read: Disadvantages of Public Provident Fund (PPF)
Interestingly, the PPF account with Rs 9000/month contribution could grow to Rs 2.36 crore in 40 years and Rs 1.63 crore in 35 years at 7.1% interest. This means, if someone starts investing in PPF from the age of 20 years, s/he would have Rs 2.36 crore in the account at the time of retirement at age 60.
Note: The PPF interest rate is revised on a quarterly basis. Historically, the PPF interest rate has remained around 8% for most of the years since the inception of the scheme. The next revision of the PPF interest rate will take place by June 30, 2023.
(Disclaimer: The above content is for general information purposes only. Please consult your investment advisor before investing in any scheme)
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