PPF Retirement: People invest in Public Provident Fund (PPF) for the feeling of ‘good days’ in retirement. PPF accounts can be opened in a post office or bank with a minimum investment of just ₹ 500. While the maximum investment limit is ₹ 1.5 lakh annually. Investing in it also provides the benefit of tax deduction under Section 80C of the Income Tax Act. It is a safe and long-term investment option, which provides you financial security after retirement.
Tax exemption on investment, interest, and maturity amount
To keep the PPF account active, you have to deposit at least ₹ 500 annually. The maturity period of this scheme is 15 years, but it can be extended. When you invest in PPF, you can claim tax benefits on deposits up to ₹ 1.5 lakh. Also, the interest you get and the final amount are completely tax-free. This triple tax benefit makes PPF an attractive investment option.
Funds worth more than ₹40 lakh
To earn more than ₹7 lakh tax-free income annually from PPF, one has to start with an investment of ₹1.50 lakh every financial year and continue it even after the maturity period of 15 years. To get maximum benefit of interest, investment should be made between 1-5 April every financial year. The investment amount in 15 years will be ₹22,50,000, estimated interest will be ₹18,18,209 and estimated maturity will be ₹40,68,209. This is the basis for building a strong retirement fund.
This much will be the fund in 20 and 24 years
Similarly, the total investment in 20 years will be ₹30,00,000. The estimated interest will be ₹36,58,288 and the estimated fund will be ₹66,58,288. To reach your goal, one has to take another extension i.e. continue investing even after 20 years.
In 24 years, we will see that the total investment has become ₹36,00,000, the estimated interest ₹58,74,664, and the estimated fund ₹94,74,664. This shows how much profit can be gained from long-term investment in PPF.
Annual tax-free income of over ₹7 lakh
The point to note here is that after 15 years, you can start withdrawing the interest earned on your entire investment. If you take an extension i.e. keep your account running, you can withdraw the interest amount once a year. At an interest rate of 7.1 per cent, your annual interest will be around ₹7,89,555. This will provide you with a stable and tax-free income after retirement.