The Public Provident Fund (PPF) has a standard duration of 15 years. But here’s the cool part: you can extend it for an additional 5 years after it matures, thanks to some special rules. This not only boosts your returns but also increases your monthly income.
Once the initial 15 years are up, you can keep extending the term for as long as you want. It’s totally up to you! At this point, you have two choices: you can either keep investing or just extend the term without adding more money.
If you choose to keep investing, the same rules apply. Your money will keep getting deposited, and you’ll earn interest on it. If you decide to extend without investing, you’ll still earn interest on the amount you already have. Right now, the interest rate for the PPF scheme is 7.1 percent.
After 20 years, you can again extend your PPF account for another 5 years, with the same options available. If you don’t invest, the annual interest rate of 7.1 percent will apply to your balance after 20 years. If you keep investing, everything continues as usual.
So, what kind of returns can you expect with the 15+5 strategy?
You can invest up to Rs 1.5 lakh in PPF each year. Let’s say you go for the maximum investment. At an interest rate of 7.1 percent, you’d end up with a return of Rs 40,68,209. If you extend for another 5 years, your total return after 20 years would be Rs 66 lakh.
Here’s a quick breakdown:
– Maximum deposit in a fiscal year: Rs 1.50 lakh
– Interest rate: 7.1 percent per annum
– Total deposit in 15 years: Rs 22,50,000
– Total fund at the end of 15 years: Rs 40,68,209
– Total deposit in 20 years: Rs 30,00,000
– Total fund at the end of 20 years: Rs 66,58,288.
If the investor decides to extend the term for an additional 5 years after 20 years without putting in more money, they’ll earn an interest rate of 7.1% on the final balance. During this 5-year period, they can take out a set amount of cash once a year. Alternatively, if they keep investing for those 5 years, they can withdraw up to 60% of their balance.
So, what’s the deal? By extending the PPF account for 5 more years without any new investments, the investor will earn 7.1% interest annually on the closing balance of Rs 66,58,288 after the initial 20 years.
Desclaimer: For any financial invest anywhere on your own responsibility, Times Bull will not be responsible for it.