Post Office Scheme: Money attracts money. This principle holds true for PPF. Even after the 15-year lock-in period is over, if you extend your account without adding a single penny, you can build an additional fund of up to Rs 40 lakh over the next 10 years. Let’s explore this step-by-step guide. A minimum of Rs 500 and a maximum of Rs 1.5 lakh can be deposited in PPF in a year.
PPF offers a fixed return of 7.1 percent annually. To reap the maximum benefits of PPF, you must also make the maximum investment, i.e. Rs 1.5 lakh annually. If you deposit Rs 1.5 lakh annually, you will have invested Rs 22,50,000 in 15 years. You will earn interest of Rs 18,18,209 on this. After 15 years, your PPF balance will be Rs 40,68,209.
Extend your PPF account without making any contributions
A PPF account can be extended for 5 years. Extensions are available with or without contributions. During the extension, you must choose whether you want to continue investing. In this case, you must choose not to contribute. After 15 years of contributions, your PPF balance will be worth Rs 40,68,209. Interest will now accrue at 7.1% annually. Over the next 10 years, at 7.1% annual interest, your balance will grow to Rs 40,09,682. This Rs 40 lakh can be created without any new investment. Thus, in 15+5+5 years, your PPF balance will be Rs 80,77,891.
Use this fund for stable income
If you wish, you can withdraw your entire money from PPF after 25 years. However, if you don’t need that much money immediately, it would be advisable to extend your PPF account and make the annual interest earned from it your regular income. This is because savings bank accounts offer 2-3 percent interest, while PPF offers 7.1 percent. If you want to earn regular income from PPF, then on a balance of Rs 80 lakh 77 thousand, you will get interest of Rs 5 lakh 73 thousand in a year at the rate of 7.1 percent. This is equivalent to an income of Rs 47 thousand per month.
If you’re looking to build a large corpus without risk, PPF is a good investment option. It offers an annual interest rate of 7.1%. This scheme is completely tax-free. There are no taxes on investment, interest, and maturity. The calculations above reflect the maximum investment amount, but you can maximize your investment by investing within your budget.