The Public Provident Fund (PPF) has always been a symbol of trust for the Indian middle class. Its tax exemptions, guaranteed returns, and protection from the Government of India insulate it from market fluctuations. People are often confused about how small monthly savings can add up to a substantial sum over 15 years. Today, we’ll explore PPF calculations to understand how a modest investment of ₹2,000 to ₹5,000 can net you a substantial sum upon maturity.
PPF Investment and Current Rules
Before we understand the profitability of the PPF, it’s important to understand its structure. This account comes with a mandatory lock-in period of 15 years. Its biggest strength is its interest rate, which is updated every three months by the Central Government. Currently, PPF offers an annual interest rate of 7.1%. You can invest a minimum of ₹500 and a maximum of ₹1.5 lakh in a financial year. The most remarkable thing is that it offers the ‘EEE’ category, which means your investment, interest, and maturity proceeds are completely tax-free.
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How much profit will you make on a monthly investment of ₹2,000
If you start small and deposit just ₹2,000 into your PPF account every month, your total investment will be ₹24,000 per year. Over the 15-year journey, you’ll end up with a total of ₹3.60 lakh. At the current interest rate of 7.1%, after compounding, you’ll receive a maturity amount of approximately ₹6,50,913 after 15 years. This means you’ll earn a net interest of approximately ₹2.90 lakh on the principal amount deposited.
The Miracle of Monthly Savings of ₹3,000 and ₹5,000
If you increase your savings a little further and invest ₹3,000 every month, your total investment will reach ₹5.40 lakh in 15 years. At maturity, with interest added, this amount will grow to approximately ₹9,76,370, very close to the magical figure of ₹10 lakh.
On the other hand, if you curb your wasteful spending and invest ₹5,000 every month in PPF, you save ₹60,000 annually. By the end of 15 years, your total deposit will be ₹9 lakh, but thanks to the 7.1% interest rate, you will receive a total of ₹16,27,284 at maturity. Here, you’ll earn interest of over ₹7 lakh, which can easily fund your children’s higher education or other major financial goals.
Who is a PPF investment for
PPF is a great option for those who are risk-averse. Whether you’re a government employee, a private employer, or running a small business, this scheme is safe for everyone. Investing in it also entitles you to a deduction of up to ₹1.5 lakh under Income Tax Section 80C.
Extension Option
Another amazing feature of this scheme is its extension option. If you don’t need the money immediately after 15 years, you can extend your account in blocks of 5 years each. You need to apply for this one year before maturity. This way, you can grow your funds for as long as you want and even turn your corpus into crores through compounding.
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