How to earn Rs 1 crore through investments in PPF

How to earn Rs 1 crore through investments in PPF

New Delhi: Public provident fund or PPF is one of the small savings plans that provide a substantial return without risk. More importantly, the risk-free return is exempt from income tax.

The PPF is a long-term debt investment instrument that falls under the Exempt-Exempt-Exempt (EEE) category, which means that investments are tax-exempt and interest earned and withdrawals are tax-exempt. tax. One of the biggest advantages of the PPF is that it offers a guaranteed tax-free return, which you cannot get in other long-term investment vehicles like NPSMutual Fund SIPs, etc. Although life insurance products offer non-taxable returns, the return is not guaranteed unlike the PPF where the returns are guaranteed.

PPF is one of the most attractive investment options for risk averse investors. As per the rules of the PPF, an investment of up to Rs 1.5 lakh each year qualifies for a tax deduction under Section 80C of the Income Tax Act 1961. term. PPF interest is reviewed quarterly by the government. For the current quarter, PPF will achieve a return of 7.1%.

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If we assume that the current interest rate of 7.1% on the PPF remains constant over the long term, one can easily accrue a retirement jackpot of over Rs 1 crore by the time of retirement.

How To Accumulate A Tax Free Pension Pool Of More Than Rs 1 Crore Via PPF:

The PPF has a maturity period of 15 years. However, another major advantage of the PPF is the fact that the PPF account can be extended for a block of five years several times after the end of its initial term. Because of this advantage, it can be used as an instrument to save for long-term goals like retirement. If you open a PPF account between 25 and 30 years and invest Rs 12,500 every month (Rs 1.5 lakh per year), then in 15 years, assuming the interest rate remains unchanged, you would have accrued Rs 40, 68 lakh.

If you extend the account for a 5-year block twice, you can easily complete 35 years of investment period before retirement. After investing Rs 1.5 lakh per year for 25 years, your amount at maturity would be Rs 1,03,08,012 crore, assuming interest remains unchanged at 7.1%. According to the PPF calculator, out of this Rs 1.03 crore, the amount deposited by you will be Rs 37,50,000 while the interest earned will be Rs 65,58,012.