PPF Investment Scheme: Public Provident Fund (PPF) is considered one of the safest and most reliable investment schemes in the country. Its biggest advantage is that it is not affected by the fluctuations of the stock market. The investment made in PPF comes with a complete government guarantee, so the risk is negligible.
Another major advantage of PPF is that it offers several tax benefits. The deposited amount is eligible for tax exemption under Section 80C of the Income Tax Act. Moreover, the interest earned on the PPF account and the entire amount received at maturity are completely tax-free.
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How much can be invested in PPF?
A minimum of Rs 500 and a maximum of Rs 1.5 lakh can be invested annually in a PPF account. This investment can be made monthly or as a lump sum annually. Currently, the government is offering an annual interest rate of 7.1 percent on PPF. This rate is considered better than the fixed deposit rates of many banks.
The original tenure of PPF is 15 years. However, if there is no need to withdraw the money after the account matures, it can be extended in blocks of 5 years. For this, the investor has to fill out a prescribed form.
How a large fund can be created with just Rs 1,000 every month
If a person deposits only Rs 1,000 every month in their PPF account, their annual investment will be Rs 12,000. Let’s say you started investing in PPF at the age of 25 and continued to deposit Rs 1,000 every month until the age of 60, i.e., for about 35 years. During this period, your total investment will be approximately Rs 4.20 lakh.
According to the current interest rate, when you retire at the age of 60, you can receive approximately Rs 18.14 lakh at the maturity of your PPF. Of this amount, approximately ₹14 lakh will be in the form of interest, and the entire sum will be tax-free.
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Interest rates expected to rise
Currently, the government has not made any changes to the interest rates of PPF and other small savings schemes for this quarter. However, it is expected that the repo rate may change following the Reserve Bank’s monetary policy review. If this happens, the government may face pressure to increase the interest rates on small savings schemes, which could lead to even better returns for PPF investors in the future.
