PPF: Public Provident Fund (PPF) is widely regarded as a secure and advantageous investment choice, particularly for individuals who prefer to minimize risk. It not only offers consistent returns but also facilitates tax savings. PPF is a favored savings plan for retirement preparation and can be extended beyond its initial maturity period. Notably, post-maturity, it can serve as a source of monthly income, potentially yielding tax-free earnings of up to Rs 24,000 each month. This presents an excellent opportunity to enhance future financial security and effectively diversify one’s investment portfolio.
An annual interest rate of 7.1%
The PPF is a long-term savings initiative that provides an annual interest rate of 7.1%. Investors can contribute a minimum of Rs 500 and a maximum of Rs 1.5 lakh annually. The scheme has a duration of 15 years, during which the interest accrued is entirely tax-exempt. Additionally, investments qualify for a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. This investment avenue is characterized by its safety and guaranteed returns, making it an ideal option for those looking to save over an extended period while also benefiting from tax advantages.
PPF account is set at 15 years
The maturity period for a PPF account is set at 15 years, although it can be extended for an additional five years within one year of maturity. This extension can be continued indefinitely. Should the account holder choose, they may retain their funds after maturity without opting for an extension or making new deposits. However, it is important to note that premature closure of a PPF account before the completion of 15 years is not permitted.
Calculation
If an individual invests Rs 1.5 lakh annually in the Public Provident Fund (PPF) and maintains this investment for 15 years, the total contribution will amount to Rs 22,50,000 at the prevailing interest rate of 7.1%. The interest accrued during this period will be Rs 18,18,209, resulting in a total corpus of Rs 40,68,209. This indicates that the initial investment can nearly double over a span of 15 years. Furthermore, if the same annual investment of Rs 1.5 lakh is sustained in the PPF at an interest rate of 7.1%, substantial returns can be anticipated after 25 years.