New Delhi: Investments in the Public Provident Fund (PPF) are among the safest ways to create robust, tax-free retirement funds. It’s one of the few saving plans that grows your investment over time while producing returns that are tax-free. PPF is more appealing than other high-return investment products like NPS mutual funds because they are taxed upon withdrawal or are redeemed in stages.
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The scheme’s interest rate, which has remained constant at 7.1 percent since the first quarter of FY22, is risk-free even though it may not be as lucrative as returns offered by other schemes like mutual funds ELSS.
An investor can amass a corpus of more than Rs 1 crore by making monthly investments of Rs 12,500 or Rs 1.5 lakh per year in PPF, which yield a return of 7.10 percent. Investment tenure may be extended by five-year increments in order to further increase this sum.
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You can easily increase the investment for 30 years before retiring if you open a PPF account between the ages of 25 and 30 and then extend it three times by blocks of 5 years. If the current interest rate of 7.1 percent remains constant, an investment of Rs 1.5 lakh per year for 30 years will result in a maturity payment of Rs 1.54 crore.
The remaining Rs. 1.09 crore, Rs 45 lakh of the total amount Rs 1.54 crore comes from interest accrued over the course of the 30-year period. PPF is a small-savings programme backed by the government that offers average returns but also offers numerous tax breaks, exemptions, and the assurance of capital protection. Under the scheme, the interest and returns earned are not taxed under the Income Tax Act.
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Investments made through the programme can be spread out over a 12-month period or in a single payment. The minimum and maximum investments for each fiscal year are 500 and Rs 1.5 lakh, respectively. The scheme’s current annual interest rate is 7.1 percent, and the maturity period is 15 years. PPF is one of the best tax-planning strategies for salaried people because deposits up to Rs 1.5 lakh per year qualify for an annual tax deduction under Section 80C of the Income Tax Act of 1961. Like all other small savings plans, the PPF’s interest rate is set by the government.
