The Public Provident Fund (PPF) is a highly popular and long-term investment scheme offered by the Post Office, designed to help people become millionaires through regular investments. It helps investors build a large corpus in a risk-free manner. The minimum maturity period for PPF is 15 years, but to become a millionaire, you need to adopt a 15+5+5 strategy.
Investing in PPF
If you deposit a maximum of ₹1.5 lakh every year for the first 15 years (ie, a total investment of ₹22.5 lakh), then at an annual interest rate of 7.1%, your fund will grow to approximately ₹40.68 lakh after 15 years. You will earn ₹18.18 lakh in interest on this amount.
After this initial period, if you extend this account twice (for 5 years each time) and continue to deposit ₹1.5 lakh annually for the next 10 years, your total fund will grow to ₹1.03 crore after 25 years. To build a corpus of ₹1.03 crore over this period, you would need to invest a total of ₹37.5 lakh, while you would earn over ₹65.5 lakh from interest alone, demonstrating the amazing effect of compound interest.
How to earn a monthly pension of ₹61,000
The most amazing thing about PPF is that after 25 years, when you have a huge corpus of ₹1.03 crore in your account, you can keep that fund in the PPF account, making it a source of regular income. You will continue to earn 7.1% interest on this deposit.
The annual interest on ₹1.03 crore at a rate of 7.1% is approximately ₹7.31 lakh. If you withdraw this annual interest monthly, you will receive a guaranteed and tax-free income of approximately ₹60,941 every month. Most importantly, your original capital of ₹1.03 crore will remain safe in the account, thus acting as a pension.
Tax Benefits
The Public Provident Fund Scheme is an excellent investment option as it falls under the EEE (Exempt-Exempt-Exempt) category. This scheme offers an interest rate of 7.1% per annum and is completely safe due to the government guarantee on deposits. You can avail a tax deduction on investments up to ₹1.5 lakh each year under Section 80C of the Income Tax Act, thereby reducing your tax liability.
Eligibility
Anyone can start investing in this government scheme at any time. A minimum deposit of ₹500 is required to open an account. If a minor wishes to invest, they can open an account with the help of their parents. Only individual accounts are allowed under this scheme; joint accounts are not permitted.