PPF Returns: Just ₹5,000 investment can create a corpus of over ₹26 lakh, see calculations..
PPF Return Calculation: If you're looking for a safe investment that not only protects your money but also provides guaranteed returns, the Public Provident Fund (PPF) is the best option for you. This scheme not only comes with a government guarantee, but the interest and maturity amount are completely tax-free. This is why it's one of the most preferred long-term investment schemes in India.
Why is PPF the most reliable investment?
PPF, or Public Provident Fund, is a long-term investment scheme administered by the Government of India. Its most significant advantage is that its interest rate is always secure, and your principal is also protected by the government. Investors benefit from long-term growth, tax benefits, and compounding interest.
Currently, PPF offers an annual interest rate of 7.1%, which is fixed by the government every quarter. The maturity period of this investment is 15 years, but if you wish, you can extend it in blocks of 5 years each.
Three major options are available at maturity
When your Public Provident Fund account completes 15 years, you have three options. So let's understand them in simple terms:
1. Withdraw the entire amount and close the account.
If you wish, you can withdraw your entire amount—your investment amount plus interest—after the completion of 15 years. In fact, this entire amount is tax-free, meaning there's no tax on the interest or the maturity amount. Furthermore, investments up to a maximum of ₹1.5 lakh per year are also eligible for tax exemption under Section 80C of the Income Tax Act.
2. Extension Option for 5 Years
If you want your money to grow further, you can extend your PPF account for 5 years. During this period, you can choose to invest a new amount or not. If you continue investing, your money grows rapidly due to interest and compounding. The advantage of an extension is that you can make partial withdrawals at any time during this period if needed.
3. Continuing the account without making any new investments
So, even if you neither withdraw money nor make any new investments, your account automatically grows for 5 years. During this time, interest continues to accrue on your old deposits. This means your money will continue to grow without you doing anything, and you can increase it again the next time.
Where to open a PPF account?
A PPF account can be opened in any public or private bank.
This facility is also available at post offices.
You can open it in your name or in your child's name (minor account).
However, keep in mind that a PPF account cannot be opened in the name of an HUF (Hindu Undivided Family).
How can an investment of ₹5,000 make over ₹26 lakh?
Now let's talk about the most important part: return calculation.
If you invest ₹5,000 every month, this amount becomes ₹60,000 in a year.
In 15 years, you will invest a total of ₹900,000.
Now, when the effect of compounding is added at an interest rate of 7.1% per annum, your total fund will reach ₹1627,284 after 15 years. This means the investment amount will be ₹900,000 and the return will be ₹727,284. If you extend this for another 5 years, the profits will be substantial. This means that after 5 more years, the investment amount will be ₹12,00,000 in 20 years, with a return of ₹14,63,315, and the fund will grow to approximately ₹26.63 lakh. This means that your small savings can turn into big wealth in the long run.
Disclaimer: This content has been sourced and edited from Zee Business. 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.
