Retirement Planning: How can a corpus of ₹2 crore be built with a monthly SIP of ₹5,000 and a PPF investment of ₹12,500?

Have you planned for your retirement? If not, you should do so soon. Regular long-term investing makes it easy to build a substantial retirement corpus. Many people start investing late, leaving insufficient time for their money to grow. You can easily build a retirement fund of ₹2 crore by investing ₹5,000 per month in a SIP and ₹12,500 per month in the PPF.

**PPF: A Highly Tax-Efficient Scheme**

The PPF (Public Provident Fund) is a highly attractive scheme for long-term investment. You can invest up to ₹1.5 lakh in a financial year. From a tax perspective, this scheme is very beneficial; it falls under the 'Exempt-Exempt-Exempt' (EEE) category. This means there is no tax on the contribution, the interest earned, or the maturity amount.

**No Tax on PPF Maturity Proceeds**

Renowned tax expert Balwant Jain explains that the PPF maturity amount is not subject to tax; it is completely tax-free. The scheme matures in 15 years. If you invest ₹12,500 per month, your total investment over 15 years amounts to ₹22,50,000. You would earn ₹18,18,209 in interest, resulting in a total maturity value of ₹40,68,209.

**Monthly SIP of ₹5,000 in a Mutual Fund Equity Scheme**

You need to invest ₹5,000 per month via a SIP in a mutual fund equity scheme for 15 years. This results in a total investment of ₹9,00,000 over the 15-year period. Assuming an annual return of 12%, your investment would grow to ₹23,79,657 in 15 years. If you add the ₹40,68,209 received from the PPF to this, the total comes to ₹64,47,866. You would need to invest this entire amount as a lump sum in an equity mutual fund scheme.

**How ​​a ₹2 crore fund will be created in 25 years**

A lump-sum investment of ₹64,47,866 in an equity mutual fund scheme would grow to ₹2,00,26,093 over 10 years. This calculation assumes an annual return of 12%. Essentially, you only need to invest ₹12,500 per month in PPF and ₹5,000 per month in a SIP for 15 years. After 15 years, you would invest the combined proceeds from both investments into an equity mutual fund scheme for another 10 years. Thus, while you only invest for 15 years, the ₹2 crore fund will be ready at the end of 25 years.

**Long-term capital gains tax will also apply**

You must keep in mind that you will have to pay Long-Term Capital Gains (LTCG) tax on the profits earned from mutual fund investments. Tax is levied on long-term capital gains exceeding ₹1.25 lakh in a financial year. This means you would have to pay a 12.5% ​​tax on ₹23,79,657. This tax amounts to ₹2,97,457.125, which can be rounded off to ₹3 lakh.

**Fund ready in 25 years and a few months after paying tax**

This implies that after deducting the tax on the ₹5,000 monthly mutual fund investment, you would be left with approximately ₹20,79,657. Now, add the proceeds from the PPF to this, as PPF investments are tax-free. Together, the total comes to ₹61,47,866. Investing this lump sum would result in a ₹2 crore fund after 10 years and a few months.

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