The Public Provident Fund (PPF) is a long-term savings scheme in India that offers reasonable returns and income tax benefits. PPF’s attractive tax benefits, including tax deductions on contributions and tax-exempt interest and maturity amount, make it an appealing investment choice.
The Public Provident Fund (PPF) is a long-term savings scheme, which was launched by the National Savings Institute, Government of India, in 1968. It serves as a potent tool to build a corpus fund with small investments over the years and also offers substantial returns as well as tax benefits.
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Double the benefits with joint investments in PPF
Married couples with separate incomes can optimise their investments by opening individual PPF accounts. This strategy can significantly enhance the benefits derived from the PPF scheme.
For instance, if both the husband and wife invest Rs 1.5 lakh annually in separate PPF accounts, at the current interest rate of 7.1 per cent, they can collectively accumulate a corpus of Rs 1 crore in about 17 years, assuming the interest rate remains constant throughout the investment period.
By investing in separate PPF accounts, the couple enjoys a larger collective investment limit (Rs 3 lakh per annum in total) and can accumulate wealth faster. Each partner’s contribution qualifies for a separate tax deduction under section 80C of Income Tax Act.
As per the existing rules, a maximum of Rs 1.5 lakh per annum investment is allowed in a PPF account.
Here are additional examples to illustrate this:
If both partners invest Rs 12,500 per month (total Rs 1.5 lakh each per year), at 7.1 per cent interest rate, their combined corpus after 17 years would be approximately Rs 1 crore. Considering the maximum limit of investment in a PPF account both the husband and wife can only invest upto Rs 12,500 per month each.
If both partners invest Rs 10,000 per month (total Rs 1.2 lakh each per year), at a 7.1 per cent interest rate, their combined corpus after 20 years would be approximately Rs 1 crore.
If both partners invest Rs 8,000 per month (total Rs 96,000 each per year), at 7.1 per cent interest rate, their combined investments would turn into nearly Rs 1 crore in 25 years.
If both partners start investing Rs 1.5 lakh each at the age of 30, their combined corpus at the age of 60 (after 30 years) would be approximately Rs 3.2 crore.
If both partners start investing Rs 1.5 lakh each at the age of 25, their combined corpus at the age of 60 (after 35 years) would be approximately Rs 4.7 crore.
The following table indicates how long will it take to achieve the goal of Rs 1 crore with PPF investments:
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| Yearly Contribution (Per Person) | Investment Period (Years) | Approx. Total Corpus (Combined) |
| Rs 1.5 lakh | 17 | Rs 1 crore |
| Rs 1.2 lakh | 20 | Rs 1 crore |
| Rs 96,000 | 25 | Rs 1 crore |
| Rs 1.5 lakh | 30 | Rs 3.2 crore |
| Rs 1.5 lakh | 35 | Rs 4.7 crore |
Eligibility for PPF and investment limit
The PPF scheme is open to all Indian resident citizens. Parents can also open PPF accounts for their minor children. However, Non-Resident Indians (NRIs) are not permitted to open new PPF accounts.
Investors can start depositing as little as Rs 500 up to a maximum of Rs 1,50,000 per annum in their PPF accounts. You can make as many deposits as you like in a month or a year, as long as the total investment does not exceed the upper limit.
By investing Rs 1.5 lakh each year in your PPF account with a fixed interest rate of 7.1 per cent per annum, your PPF balance can grow significantly due to the power of compounding.
Building wealth with PPF
The power of compounding can best be harnessed with consistent investments held over a long term. With a tenure of 15 years, PPF perfectly fits into this strategy. You can also extend the PPF investment in blocks of 5 years each after 15 years.
PPF also offers attractive tax benefits. Contributions up to Rs 1.5 lakh per annum qualify for tax deductions under section 80C of the Income Tax Act. Moreover, the interest earned and the maturity amount are tax-exempt, making it an appealing investment choice.
