Nowadays, everyone wants their small savings to grow into a significant amount in the future, but due to the fluctuations and risks in the stock market, many are afraid to invest. For such people, the Public Provident Fund (PPF) is a government-backed option that is completely safe and helps in building a significant fund in the long run. The special thing is that it does not require large monthly investments. If someone regularly deposits just Rs 4000 per month, this amount can grow into lakhs of rupees in a few years.

What is PPF and why is it special

PPF or Public Provident Fund is a savings scheme backed by the Government of India. The money invested in it is considered completely safe, as it is guaranteed by the government. This scheme is specially designed for those who want to save with discipline for the long term. The most important feature of PPF is that the interest earned is tax-free and the investment is also tax-deductible, i.e. it provides both savings and tax benefits.

How does the PPF scheme work

The tenure of a PPF account is 15 years. One can invest a minimum of Rs 500 and a maximum of Rs 1.5 lakh per year. The investment can be made in one go or in installments. Currently, PPF earns an annual compound interest of about 7.1 percent. The interest increases at an annual compound rate, which makes the money grow faster. Since it is a government scheme, there is no market risk.

There is no compulsion to withdraw money even after completing 15 years of PPF account. The account can be extended for 5 years at a time. It can run for a total of 25 years. If one does not withdraw money, the deposit continues to earn interest. This allows the savings to grow without any extra effort.

How to accumulate Rs 13 lakh by depositing just Rs 4,000 per month

If someone deposits Rs 4,000 per month or Rs 48,000 per year in a PPF account and continues this investment for 15 years, then the total investment will be Rs 10,000. Rs 7.20 lakh and the total return (interest) will be around Rs 13.01 lakh. This will result in a total profit (interest) of around Rs 5.81 lakh, meaning that small monthly savings will create a significant corporation.

If someone continues to invest for 25 yearsIf someone continues to invest for more than 15 years and keeps that money in PPF for a total of 25 years, then the magic of compound interest becomes even more evident. The estimated amount after 25 years will be around Rs 32.98 lakh, out of which around Rs 20.98 lakh will be earned from interest alone. This is a great option for those who want to create a safe fund for retirement or their children’s future.