If you’re looking to accumulate a substantial corpus by the time you retire, the Public Provident Fund (PPF)’s 15+5+5 investment strategy could be the most powerful strategy for you. This plan comes with a minimum maturity period of 15 years. If you deposit money consistently for 15 years and then extend the account twice (for five years each time), you can build a massive corpus of approximately ₹1.03 crore in just 25 years. This massive corpus will provide you with a steady income of approximately ₹61,000 each month.
Why is PPF special
PPF currently offers an excellent annual interest rate of 7.1%, which increases at a compounding rate. The biggest attraction of this scheme is that the amount deposited in it is eligible for a tax deduction of up to ₹1.5 lakh per year under Section 80C of the Income Tax Act. Furthermore, the interest earned and the entire amount withdrawn after 25 years are completely tax-free. This is called the ‘EEE’ (Exempt-Exempt-Exempt) benefit, making it an excellent investment option.
How to accumulate ₹1.03 crore
This millionaire-making strategy works in three stages and delivers impressive results.
Phase 1 (Initial 15 Years):
You deposit a maximum of ₹1.5 lakh (i.e., ₹12,500 per month) every year for the first 15 years. This brings your total investment to ₹22.5 lakh. At an interest rate of 7.1%, this amount will grow to approximately ₹40.68 lakh by the end of 15 years. During this period, ₹18.18 lakh will be added to your account as net interest.
Step 2 (Next 5-Year Extension):
Don’t close the account after 15 years, but instead extend it for another 5 years. You can opt out of making any new investments during this period. Your ₹40.68 lakh will continue to earn interest. By the end of the 20th year, your total amount will grow to approximately ₹57.32 lakh! An interest of ₹16.64 lakh will have been added to this.
Step 3 (Final 5-Year Extension):
If you want to build an extraordinary corpus, extend the account for another 5 years while continuing to invest ₹1.5 lakh every year. This is the most powerful step. By following this strategy, after 25 years, your total corpus will reach the magical figure of ₹1.03 crore!
How will you earn ₹61,000 every month
At the end of 25 years, when your PPF account has accumulated a massive corpus of ₹1.03 crore, don’t withdraw it immediately. If you keep this original corpus in the account and continue with 5-year extensions, it will continue to earn interest at the rate of 7.1% per annum.
Calculating 7.1% annual interest on ₹1.03 crore, it comes to approximately ₹7.31 lakh per year. If you divide this annual interest monthly, you will earn approximately ₹60,941 per month. The most exciting thing is that you will continue to withdraw this amount every month, while your original deposit of ₹1.03 crore will always remain safe in the account. It will provide you with a great income stream throughout your life.
Who can apply, and what are the account opening rules
This groundbreaking government scheme is open to every Indian citizen. Any adult can start investing at any time. If a minor wishes to invest, they can open an account with the help of their parents or legal guardian. A minimum deposit of ₹500 is required.
An important rule of PPF is that you can only open an individual account; joint accounts are not permitted. You can open your PPF account at any post office or government/private bank and start taking advantage of this safe and beneficial scheme today.
