New Delhi: Public Provident Fund or PPF is one of the most popular investment tools for long-term investors, who are risk-averse and want to park their money in risk-free schemes. PPF falls in the exempt-exempt-exempt (EEE) category, which means returns earned are totally tax free.
Under the government-backed small saving scheme, an adult Indian or a guardian on behalf of a minor/person of unsound mind can open a PPF account with a minimum deposit of Rs 500 and a maximum yearly commitment of Rs 1.5 lakh.
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Using this savings scheme, investors can build a healthy retirement corpus. Currently, an interest rate of 7.10 per cent per annum is being offered on PPF which is compounded yearly. Even though PPF interest rate is subject to change on quarterly basis, an investor can still get crores on maturity by depositing a few thousands on a monthly basis.
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To be specific, if an investor invests Rs 12,500 per month or Rs 1.50 lakh yearly in their PPF account, they would get a maturity amount of around Rs 2.27 crore. However, it must be remembered that the maturity period of PPF account is 15 years and one needs to submit Form 16-H to extend it.
A PPF account can be extended in a block of 5 years and for that one will have to submit Form 16-H in 15th year of PPF account opening. They will have to submit another Form 16-H in the 20th year of account opening if they wish to remain invested.
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To extend PPF account investments for 35 years, an individual will have to submit Form 16-H in 15th, 20th, 25th and 30th year of PPF account opening.
Now, if we take the current 7.10 per cent PPF interest rate and apply it for the next 35 years, a monthly investment of Rs 12,500 or simply Rs 1.50 lakh in one year would translate to a maturity amount of Rs 2,26,97,857 or around Rs 2.27 crore.
While the invested amount during the years would be Rs 52.5 lakh the PPF interest earned in this period would be around Rs 1.68 crore.
