PPF Investment Tips: If you are looking for a government scheme where you get tax exemption and also get guaranteed returns, then Public Provident Fund (PPF) can be the best option for you.
In fact, this scheme is not only safe, but can also be a means of building a strong retirement fund for investors over the long term.
This government-backed scheme is completely risk-free and in it you get the benefit of EEE (Exempt-Exempt-Exempt) tax benefit – that is, the investment amount, the interest earned on it and the amount received on maturity are all completely tax-free. So let’s understand how you can earn Rs 2.88 lakh per year from PPF. Let’s understand the secret formula of PPF.
Any Indian citizen can open a Public Provident Fund account in his own name at a post office or any bank. Moreover, this account can also be opened in the name of a minor child, who is looked after by a parent or guardian.
It is worth noting that only one PPF account can be opened in the name of a person. There is no facility to open a joint account in this. Therefore, if both husband and wife are working, then both can open separate accounts in their respective names. This gives a family double tax benefit and investment benefit.
Currently, the government is paying an annual interest rate of 7.1% on PPF. In fact, this interest is accumulated in the form of compound interest. That is, every year you will get interest on your principal amount and then interest will be added on that interest as well. Due to which your amount will grow rapidly. The tenure of PPF account is 15 years, which can be extended for a period of 5-5 years.
Talking about investment, a person can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh every year. If both husband and wife open separate accounts, the family can invest up to Rs 3 lakh annually. Let’s assume that you invest a maximum of Rs 1.5 lakh in PPF every year for 15 years, then after 15 years, you will get approximately Rs 40,68,209 on maturity.
In fact, out of this, about Rs 18,18,209 will be interest income only, that is, you will get about 45% more return than what you invested through interest alone. That too, completely tax-free. In simple terms, if you have deposited Rs 1.5 lakh every year for 15 years in the Public Provident Fund, your amount at maturity will be Rs 40,68,209.
Now, if you keep this amount in the account, at the current interest rate of 7.1%, you will get an annual interest of about Rs 2,88,842. That means, you can earn a guaranteed income of lakhs every year without making any new investments. The most special thing about PPF is that even after completing 15 years, you can increase your account “Extension Without Contribution” i.e. without making any new investment.
During this period, you will continue to earn interest on the amount already deposited, i.e. your amount will continue to grow every year without adding any new money. For example, if you extend the account after 15 years and have ₹40 lakh deposited, you can earn up to ₹2.88 lakh every year in the form of interest alone. That too without making a single new investment.
Why is PPF so special?
Tax-free returns: There is no tax on the interest and maturity amount.
Guaranteed returns: The investment is completely safe due to the interest rate fixed by the government.
Loan facility: It is possible to take a loan or partial withdrawal from the account if necessary.
Great option for retirement planning: Stable and secure returns over a long period.
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