Public Provident Fund, PPF:Public Provident Fund (PPF) has long been a popular option for investors who want long term savings. Post Office Small Savings Scheme PPF is known for security and stability. In this government scheme, the money of the investors is completely safe. There is also a guarantee of getting the interest declared every three months on it.
Public Provident Fund teaches to invest in a disciplined manner. This government scheme matures in 15 years, that is, it promotes long term investment. The aim of this scheme is to create a big fund in the future through regular savings. Currently, the interest on deposits in PPF is 7.1 percent per annum. The government last changed the interest rate for the April-June 2020 quarter. Since then, the annual interest rate on PPF has remained at 7.1 percent. Even though the PPF rate has not increased in the last few years, this small savings scheme gives investors the benefit of compounding.
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How many accounts can be opened
An adult individual can open only one PPF account. A guardian can also open an account in the name of his minor child. This account can be opened in a post office or a bank.
It is necessary to deposit at least Rs 500 in a financial year in PPF. In this, the amount can be deposited in any number of installments in multiples of Rs 50 in a financial year, that is, investors can deposit amounts like 50, 100, 150, 200, 250, 300..7,750, 12,500 several times in a year. Keep in mind that in this scheme it is necessary to invest at least Rs 500 in every financial year. A maximum of Rs 1,50,000 can be deposited in a PPF account in a financial year. The maturity of the scheme is 15 years, after which you get the full amount by adding interest and principal.
If the minimum deposit of Rs 500 is not made in any financial year, the PPF account is closed. The closed account can be reopened by the depositor before maturity by paying the minimum subscription of Rs 500 and a fee of Rs 50 for every default year.
In this article, we will understand how much maturity amount a person can create if he invests a maximum of Rs 1.5 lakh every year or Rs 12,500 every month in PPF scheme for the entire 15 years. See the complete calculation here.
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How much maturity fund can you raise
Maximum Monthly Deposit: Rs 12,500 (1.50 lakh per annum)
Interest Rate: 7.1% annual compounding
Total Investment in 15 Years: 22,50,000
Amount on maturity after 15 years: Rs 40,68,209
Interest benefit: Rs 18,18,209
Suppose if an investor deposits 10 thousand rupees every month in a PPF account, then according to this he deposits 120000 rupees in a financial year. If this is done for the entire 15 years
Deposit in a Financial: Rs 1,20,000 (Monthly 10 thousand)
Interest Rate: 7.1% annual compounding
Total investment in 15 years: Rs 18,00,000
Amount on maturity after 15 years: Rs 32,54,567
Interest benefit:Rs 14,54,567
What percentage of total investment on maturity: 81 percent
On the other hand, if he deposits only Rs 7750 monthly in the PPF account for the entire 15 years, then how much will be the maturity fund
It will be made. See the calculation here.
Monthly investment in PPF: Rs 7750
Investment in a Financial Year: Rs 93,000
Interest Rate : 7.1% annual compounding
Total Investment in 15 Years: Rs 13,95,000
Fund on maturity after 15 years:Rs 25,22,290
Interest benefit: Rs 11,27,290
,Note : Public Provident Fund is currently getting 7.1 percent annual interest. In our calculations, we have done the calculation on the basis of continuation of the current interest rate.)
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Let us tell you that the PPF account will mature after 15 financial years except the financial year in which the account was opened. After this, it depends on the account holder whether he will continue the account or not.
If a PPF subscriber wishes, he can extend his account for a further period of 5 years by applying to the concerned post office. However, this has to be done within one year of maturity. In an extended account with deposits, the maximum limit of balance credit at the time of maturity in a block of 5 years can be withdrawn in each financial year up to 60%.
Now, if you do not withdraw the maturity amount after 15 years and invest it for the next 10 years in two blocks of 5 years each, you will have a corpus of more than Rs 1 crore.
Understand it this way that in 25 years your total deposit amount will become Rs 37.5 lakh. And you will get interest of Rs 65.58 lakh on it, which makes the total amount Rs 1.03 crore. In the end, you will have a total corpus of Rs 1.03 crore. However, to continue the PPF account even after completion of 15 years, the investor will have to fill and submit Form 4 in the concerned post office or bank within 1 year of account maturity.
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How is interest calculated
The interest rate is notified by the Government on a quarterly basis. Interest is calculated on the lowest balance in the account between the end of the fifth day and the end of the month for a calendar month. Interest is credited to the account at the end of every financial year. Interest will be credited to the account at the end of every financial year.
There are many benefits of investing in PPF scheme
Investments up to Rs 1.5 lakh annually in PPF are eligible for tax exemption under Section 80C. Also, the interest earned on it and the entire amount received on maturity are completely tax-free. In terms of income tax, PPF is a ‘Triple E’ (EEE) scheme. Investing in PPF can be a right decision for better security and tax benefits.
A loan can be taken after the expiry of one year from the end of the financial year in which the account is opened and before the completion of 5 years. That is, if a person applies for an account opened during the financial year 2024-25, then a loan can be taken in the year 2026-27.
The customer can make 1 withdrawal during the financial year after completion of 5 years excluding the year of opening the account. That is, if the account is opened during 2024-25-11, then withdrawal can be made during 2030-31 or later.
