PPF Saving Scheme: After the Reserve Bank of India (RBI) reduced the repo rate, almost all banks, including SBI and HDFC Bank, have reduced the interest rates on FD (Fixed Deposit). FD has always been considered a safe investment. A large number of people invest in it due to good interest and no risk of losing money. But now investors are worried due to the reduction in interest rates.
Although the interest rate of FD has come down, there is still a place where you can get a great interest rate. Your money will be safe, and you will also get tremendous tax benefits. We are talking about the Public Provident Fund (PPF). Many people believe that it is just a means to save tax and save a little amount for retirement. But, it is not so. PPF also helps in creating a huge fund in the long term.
How to become a millionaire with PPF
Yes, you can also become a millionaire through PPF. By adopting the 15+5+5 strategy of investing in PPF, you can create a fund of crores in just 25 years. The most important thing is that you can also get a good pension on this amount. Since PPF is a government scheme, the money invested in it is completely safe, and it also gives a stable and reliable return. This strategy is best for those who want to make big money in the long term with low risk.
How much interest is being received on PPF
Currently, 7.1% annual interest is being received on PPF. This interest is compounded every year. This means that you get interest on interest as well. This power of compounding interest on interest is what makes PPF so special. The interest received in this and the amount received on maturity are completely tax-free. You can invest a minimum of ₹ 500 and a maximum of ₹ 1.5 lakh every year in PPF.
Owner of 1.03 crores in 25 years
If you invest in PPF, then you can invest in 7.1% annual interest. If you invest ₹12,500 every month, then this amount becomes ₹1.5 lakh in a year. If you extend this scheme twice for 5 years each after completion of 15 years, then after a total of 25 years, you can have a fund of about ₹1.03 crores. In this, you will get more than ₹65 lakhs from interest alone.
Is your income limited
If your income is limited and you can deposit only ₹4,585 every month, even then, if you continue investing in PPF, then in about 35 years, you can become the owner of ₹1 crore. This shows that with discipline and patience, even small investments can give big benefits in the long run.
Why is it necessary to invest for 15 years
The basic tenure of the PPF scheme is 15 years. After the completion of 15 years, the investor has two main options:
Withdraw the entire amount
You can withdraw your entire deposit amount and the interest earned on it.
Extend the scheme
You can take two extensions of 5 years each. In these 10 years, you can let your amount grow without depositing any money, or you can continue investing. If you continue investing the money, an even bigger amount will be created. This flexibility makes PPF even more attractive.
Tax exemption in PPF
You get the benefit of triple tax exemption in PPF, which makes it one of the most attractive tax-saving options. If you invest up to ₹1.5 lakh every year, you can get tax exemption under Section 80C of the Income Tax Act. The interest received on this is also completely tax-free. You do not have to pay any income tax on this. The entire amount received on maturity is also tax-free.
That is, you get the benefit of tax exemption on all three – investment, interest, and maturity, which increases your real earnings even more. This is best for those who want safe and stable returns, along with saving tax.