PPF Calculation: How can investing ₹1.5 lakh in PPF build a fund of ₹1 crore? know here..
If you are a salaried employee and are wondering how to build a substantial corpus without taking on excessive risk, the PPF (Public Provident Fund) could be your most robust option. It is not merely a savings scheme; rather, it is a tool capable of gradually transforming you into a 'crorepati'—and doing so completely tax-free.
However, the real question is: can one truly accumulate ₹1 crore through the PPF? And if so, how? We break down the entire mathematical logic behind this in simple, easy-to-understand language right here.
**Understand the Full Picture in 5 Key Points:**
* You can invest up to ₹1.5 lakh annually in a PPF account.
* It offers a compounding interest rate of 7.1%.
* There is a 15-year lock-in period, though extending the tenure is crucial.
* A corpus of over ₹1 crore can be built within 25 years.
* Timely extensions and continued investment are essential.
**Why is Accumulating ₹1 Crore via PPF Possible?**
The interest earned in a PPF account is added to the principal amount each year, and subsequent interest is calculated on this accumulated sum.
It is this very concept of "interest on interest" that enables you to build a massive corpus over time.
While your actual investment remains relatively modest over the long term...
...remember that the accumulated interest grows into a colossal sum.
**Key Features of the PPF:**
* **Interest Rate:** 7.1% per annum
* **Maximum Investment:** ₹1.5 lakh per year
* **Lock-in Period:** 15 years
* **Taxation:** Completely tax-free (EEE status)
* **Extension:** Available in blocks of 5 years each
**How Does ₹1 Crore Get Built in 25 Years?**
Now, for the most important question: How does the calculation work?
Step 1: The First 15 Years
Total Investment: ₹22.5 Lakhs
Fund Value: Approx. ₹40–41 Lakhs (PPF)
Step 2: Years 16 to 20 (First Extension)
Additional Investment: ₹7.5 Lakhs
Total Fund Value: ₹66–67 Lakhs
Step 3: Years 21 to 25 (Second Extension)
Extra Investment: ₹7.5 Lakhs
Total Investment: ₹37.5 Lakhs
Final Fund Value: ₹1.02–1.05 Crores
It is worth noting here that by investing ₹37.5 Lakhs, you earn over ₹65 Lakhs solely through interest.
What does this mean for you?
If you maintain consistency and discipline over time, you can build a corpus worth crores without taking any risk.
The PPF may be slow-paced, but it is the safest investment option available.
In the long run, it proves to be far more robust than a Fixed Deposit (FD).
How to Open a PPF Account?
Log in to your Net Banking or Mobile Banking portal.
Select the 'PPF Account' option.
Fill in your personal details.
Enter the investment amount.
Verify the transaction using the OTP.
Your account will be opened instantly.
What are the Withdrawal Rules?
Partial withdrawals are permitted after 7 years.
You can withdraw up to 50% of the funds.
This calculation is based on the previous year's balance.
What is Required After 15 Years?
This is the most crucial part.
You must extend your account.
There are two ways to do this:
With Contributions:
You must fill out Form H.
Without Contributions.
What Should You Do Now?
Cultivate the habit of investing ₹1.5 Lakhs every year.
Do not forget to extend your account after 15 years.
Avoid making withdrawals in the interim.
Maintain a long-term perspective.
Why is this so important?
Because most people stop investing midway through the process.
They forget to extend their accounts.
And, consequently, they miss out on the opportunity to build a corpus worth crores.
Disclaimer: This content has been sourced and edited from News18 Hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
