PPF Scheme: After the Reserve Bank of India (RBI) reduced the repo rate, almost all banks including SBI and HDFC Bank have reduced the interest rates on fixed deposits (FD). FD has always been considered a safe investment, where people invest in large numbers due to good interest and no risk of losing money. But now investors are worried due to the reduction in interest rates.

Although the interest rate of FD has come down, there is a place where you can still get great interest. Here your money will be safe and you will also get tax benefits. We are talking about the Public Provident Fund (PPF). Many people believe that it is just a way to save tax and save a small amount for retirement, but it is not so. PPF also helps in creating a big fund in the long term.

This is how you can become a millionaire with PPF

By adopting the ’15+5+5′ strategy of investing in PPF, you can create a fund of crores in just 25 years. The special thing about this is that you will also get a good pension for this amount. Since PPF is a government scheme, the money invested in it is safe and it gives stable and reliable returns.

Interest is being received on PPF

PPF is currently getting 7.1% annual interest. This interest is compounded every year. This means that you get interest on interest as well. This power of compounding makes PPF so special. Both the interest received in it and the amount received on maturity are tax-free. You can invest a minimum of ₹500 and a maximum of ₹1.5 lakh in PPF every year.

Invest ₹12,500 every month, and become a millionaire

If you invest ₹12,500 every month in PPF, then this amount becomes ₹1.5 lakh in a year. If you extend this scheme twice after 15 years (for 5 years each time), then after a total of 25 years you will have a fund of about ₹1.03 crore. In this, you will get ₹65 lakh only from interest. If your income is limited and you are able to deposit only ₹4,585 every month, even then if you continue investing in PPF, then in about 35 years you can become the owner of ₹1 crore.

15 years of investment is necessary in PPF

The basic period of the PPF scheme is 15 years. After the completion of 15 years, the investor has two options:

  • You can withdraw your entire invested amount and the interest earned.
  • You can take two extensions of 5 years each. During these 10 years, you can leave your money in the PPF account without investing further and keep earning interest on it. If you continue to invest money, a large amount will be created. This flexibility makes PPF even more attractive.

Tax benefits on PPF

PPF investments get ‘EEE’ (Exempt-Exempt-Exempt) status, making it one of the best tax saving options:

  • If you invest up to ₹1.5 lakh every year, you can avail tax exemption under Section 80C of the Income Tax Act.
  • The interest earned on this is also completely tax-free.
  • The total amount received on maturity is also tax-free.

That is, you get the benefit of tax exemption on all three – investment, interest, and maturity. This makes PPF an excellent option for those who want to save tax and create a large fund for the future while keeping their savings safe.