The central government runs several small savings schemes to make the citizens of the country financially secure. Among these schemes, the Public Provident Fund (PPF) scheme is considered one of the most reliable and popular investment options. This scheme has long been a symbol of trust among investors because it offers guaranteed returns along with government security.
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The PPF scheme currently offers an annual interest rate of 7.1 percent, which is compounded annually. The special feature of this scheme is that the investment amount, the interest earned, and the maturity amount are all tax-free, making it an excellent long-term savings option.
The PPF scheme can be started with a small investment
A large sum of money is not required to open a PPF account. Anyone can start this scheme by depositing just Rs 500 annually. A maximum of Rs 1.50 lakh can be invested in a financial year. A PPF account matures in 15 years and can be opened at any authorized bank in the country, in addition to post offices.
Investors can deposit a lump sum amount or invest in a maximum of 12 installments throughout the year, according to their convenience. This flexibility makes PPF attractive to both salaried individuals and small investors.
How much return will you get by depositing Rs 7,000 every month?
If an investor deposits Rs 7,000 every month in a PPF account, their annual investment becomes Rs 84,000. Investing in this manner continuously for 15 years results in a total investment of Rs 12,60,000. According to the current interest rate, the investor receives approximately Rs 22,78,197 at maturity. This includes approximately Rs 10,18,197 as interest alone. Thus, the PPF scheme is not only a safe investment but also helps in building a strong fund for the future.
Loan and withdrawal facilities from the PPF account
Those who invest in the PPF scheme not only benefit from savings but also have access to loan facilities when needed. After a few years of opening the account, investors can take a loan based on their PPF balance. However, the account must remain active.
If the minimum deposit of Rs. 500 is not made in any given year, the PPF account may become inactive. However, it can be reactivated by paying a small penalty.
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The PPF has strict rules regarding withdrawals to encourage long-term investment. No withdrawals are allowed for the first 5 years after opening the account. After that, partial withdrawals are permitted in cases of serious illness, higher education, or other special circumstances.