The Public Provident Fund (PPF) is considered a highly popular investment avenue due to its guaranteed returns supported by the government. This long-term investment tool is open to all Indian citizens, extending to minors under the supervision of a guardian as well. Contributors must commit a minimum of Rs 500 annually, with a ceiling of Rs 1.5 lakh per year.
Following the seventh year, investors are allowed to make partial withdrawals, while the PPF reaches full maturity after 15 years. Noteworthy for its reliability and tax benefits, the PPF stands out as a secure investment choice.
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Key points
1. The Public Provident Fund (PPF) interest rate is determined by the Ministry of Finance quarterly, meaning it can be revised every three months. Currently, the PPF interest rate is set at 7.1% for the October to December 2024 quarter.
2. Interest on a PPF account is calculated based on the minimum balance held in the account between the 5th day and the last day of the month. The interest earned is then credited to the account at the end of each financial year.
3. A primary benefit of PPF accounts is their tax advantages. Deposits made to a PPF account are eligible for deductions under Section 80C of the Income Tax Act, and the interest earned is also exempt from income tax under Section 10.
4. A PPF account matures 15 years from the opening date, excluding the first year.
5. When the account reaches maturity, account holders can choose from three options: 1) close the account and withdraw all funds by submitting a closure form and passbook; 2) keep the account open without making additional deposits, continue earning interest, and make one annual withdrawal or withdraw at any time; or 3) extend the account for another five years, with the ability to renew every five years by submitting an extension form within one year of maturity.
PPF calculations
1. Investing Rs 1.5 lakh (maximum limit)
Investing in a PPF scheme has the potential to generate substantial returns over an extended period. By investing the maximum allowable amount of Rs 1.5 lakh in a single installment at the current interest rate of 7.1%, you can expect to accumulate a total sum of Rs 40,68,209 after 15 years. This total includes your initial investment of Rs 22,50,000 over the 15-year period, as well as the accrued interest of Rs 18,18,209.
2. Investment variations:
> Investment of Rs 2000 per month
Annual investment: Rs 24,000
Total investment over 15 years: Rs 3,60,000
Interest earned: Rs 2,90,913
Maturity amount: Rs 6,50,913
> Investment of Rs 3000 per month
Annual investment: Rs 36,000
Total investment over 15 years: Rs 5,40,000
Interest earned: Rs 4,36,370
Maturity amount: Rs 9,76,370
> Investment amount: Rs 4,000 per month
Annual investment: Rs 48,000
Total investment over 15 years: Rs 7,20,000
Interest earned: Rs 5,81,827
Maturity amount: Rs 13,01,827
PPF corpus with monthly investment:
> Investment amount: Rs 5,000 per month
Annual investment: Rs 60,000
Total investment over 15 years: Rs 9,00,000
Interest earned: Rs 7,27,284
Maturity amount: Rs 16,27,284
Crorepati formula:
After investing in your Public Provident Fund (PPF) account for 15 years, you have the opportunity to extend the account for an additional block of 5 years. If you choose to avail of this option twice, investing in PPF for a total of 25 years, the final corpus at the end of this period will amount to Rs 1,03,08,014.97/-, surpassing the notable milestone of Rs 1 crore.
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Should you decide to prolong the tenure of your PPF account for another 5 years, extending the overall investment period to 30 years, the accumulated corpus is projected to reach Rs 1,54,50,910.59/-, exceeding Rs 1.5 crore. This value comprises the total investment of Rs 45 lakh from your side, along with an interest payout of Rs 1,09,50,911/-.
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