SWP in PPF: Every month you get 1.20 lakh tax free income from PPF, this scheme is also useful for pension

PPF as a Pension Scheme :Public Provident Fund is also known as Retirement Scheme in the popular small savings scheme of the post office. Due to the maturity of this scheme being 15 years, many employed people invest in it, so that they can raise some funds for retirement. But very few people know that it can be used not only to create a big fund but also for pension income. If you read the rules of PPF carefully and invest as a smart investor according to those rules, then you can also use this government account for a good tax free pension after retirement. Know how…..

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Rules for extending PPF

The maturity period of Public Provident Fund is 15 years. But you can continue it for as long as you want in 5-5 year increments (PPF Extend Rules). That is, you can continue the scheme for 20 years or 25 years or 30 years or 35 years. After maturity, if you want, you can extend it for 5 years at a time by continuing to invest or without investing anything. If you continue this scheme after maturity without investing anything, then the funds in the account will keep earning interest according to the current interest rate. If you invest, then this scheme will keep giving the same returns as before maturity. Let us tell you that currently the interest rate on the scheme is 7.1 percent per annum.

Withdrawal Rules on Extension

Suppose you do not withdraw the money when the scheme matures and extends it for 5 years. In the first case, you extend it after maturity without investing anything. In the second case, you continue investing as before during the extended period. In the first case, you can withdraw the entire amount once every year during the extended 5 years. Whereas in the second case, you can withdraw up to 60 percent of the money every year (PPF Withdrawal Rules).

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Create a fund before retirement

Let’s assume that both you and your spouse have started investing in a PPF account. Even if you start investing in this scheme at the age of 35, you will have the option to extend this scheme for 10 years even after the maturity of 15 years. That is, you can run this scheme for 25 years, when you will be 60 years old.

There is a rule to deposit a maximum of Rs 1.50 lakh in a financial year in PPF. If both of you deposit Rs 1.50 lakh every year in your accounts, then at the rate of 7.1 percent interest, there will be an amount of Rs 40,68,209 in each account on maturity of 15 years. Suppose you continue investing in this way for 5 more years i.e. for the next 10 years, then after 25 years, there will be Rs 1 crore in each account.

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You will get tax free pension after retirement

Now the time for your retirement has come. In such a situation, you can extend the PPF account for 5 years and 5 years without investing. Interest will continue to be charged on the fund of Rs 1 crore in your and spouse’s account. If the interest rate is assumed to be the same as the current rate i.e. 7.1 percent, then an annual interest of Rs 7,31,300 will be added to each account. That is, the interest on both accounts will be Rs 14,62,600.

If we look at the withdrawal rules on extension, then if you continue the account without investing anything, you can withdraw the entire fund once every year in the extended 5 years. In such a situation, if you withdraw only the interest money along with your spouse, then you can withdraw Rs 14,62,600 every year which will be Rs 1,21,883 on a monthly basis. At the same time, there will be no tax on this withdrawal.

(source : india post, groww, clear tax)