The Public Provident Fund, or PPF, was established by the Indian government in the past to help small savers who do not like to take risks. It is one of the most popular government sponsored savings plans in India. The PPF’s Exempt-Exempt-Exempt (EEE) feature, which makes it completely tax-exempt, makes it one of the few programs that offer the public a way to avoid taxes. The PPF, which was first proposed in 1968 by the National Savings Institute of the Ministry of Finance, has become a powerful instrument for Indians to enjoy tax benefits.
PPF now offers an interest rate of 7.1% per annum, with interest calculated monthly. Under the rules, investors can deposit funds into their PPF accounts for up to 15 years in a row. The duration of the PPF account can be extended for as many years as needed if the owner does not need the money at the end of the 15 year period. A PPF Account Extension Form must be submitted in batches of five years to do this. PPF accounts allow annual investments as low as Rs 500 and as high as Rs 1.5 lakh.
With its high popularity, low risk and tax exempt status, the PPF can also help investors accumulate up to Rs 1 crore if they invest wisely. It also offers good interest rates. Investors should use the procedures described below to achieve this.
Your PPF account would receive a monthly investment value of around Rs 12,500 if you contribute Rs 417 per day. This indicates that you are investing just over Rs 1.50,000 per year, the maximum allowed, in your Public Provident Fund account. The total money accumulated in 15 years will be Rs 40.58 lakh; beyond that, the term must be extended twice in five-year increments each.
The amount you will receive at maturity if you continue this behavior from age 25 until age 50, or over a period of 25 years, could reach Rs. 1.03 lakh crore. The total interest earned will be close to 66 lakh and will be completely tax free. You would have invested around Rs 37 lakh in total over 25 years. With this in mind, it should be noted that since interest is calculated monthly, the optimal time to deposit money is between the first and fifth of each month.
You don’t need to invest such a large sum if you are not able to. The PPF, or Public Provident Fund, allows for various investment options, as individuals can fund their accounts with as little as Rs. 500 per annum.