Regular investment can give big returns in the long run. Experts say this is true. Today, many investment options are available in the market. But all of them have some risk.
The stock market has the highest risk, so many people avoid investing there. If you want safe returns, post office small savings schemes are a good choice. These schemes are backed by the government and give guaranteed returns. One popular scheme is the Public Provident Fund (PPF). This scheme can help you build a large amount of money in the long run.
Public Provident Fund (PPF): How It Works
Currently, PPF gives 7.1% interest per year. The interest is compounded annually and is completely tax-free.
You can deposit money in PPF every year. The minimum deposit is Rs. 500. You can deposit the maximum allowed amount each year. You can pay this in one lump sum or in monthly installments. All investments in PPF are tax-free.
Adult Indian citizens can open a PPF account. A guardian can also open an account for a mentally challenged person. Each person can open only one PPF account.
A PPF account matures in 15 years. After 15 years, you can extend it by 5 more years by applying to the post office.
If you invest Rs. 11,000 every month for 25 years, your yearly investment will be Rs. 1,32,000. The total investment after 25 years will be Rs. 33,00,000. The maturity amount will be Rs. 90,71,053, and the total interest earned will be Rs. 57,71,053.
This means that by investing Rs. 11,000 per month, you can create a fund of 90 lakh in 25 years. You will invest Rs. 33 lakh, and the interest income will be Rs. 57.7 lakh. After 15 years, you need to apply to extend the account to reach the full maturity.