The Public Provident Fund (PPF) can make this dream come true. PPF is considered an excellent scheme for long-term investment and tax benefits, but it can also help you earn lakhs of rupees every year from the comfort of your home. But to achieve this magical goal, you need to adopt a unique strategy: take advantage of the PPF Extension without contributing.
How to earn interest without contributing
To earn interest from PPF without contributing, you must invest in it continuously for 15 years, starting at the age of 25. PPF matures in 15 years. Upon completion of 15 years, you will be 40 years old. Upon maturity, you will have a wonderful opportunity to earn “for free.” This income will come solely from interest.
A great way to earn money without contributing
After 15 years of continuous investment, when your scheme matures, you do not have to withdraw the money. If you do this, the amount deposited in your PPF account will continue to earn interest based on PPF calculations. This is called “PPF Extension Without Contribution.”
No application is required for extension without contribution; it is automatically applied if you don’t withdraw the money after maturity. You can withdraw the entire amount from such an account at any time, or let it remain in the account and continue earning interest.
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How much PPF fund will be created in 15 years?
The maximum annual investment in PPF is ₹1.5 lakh. You would need to deposit the same amount every year for 15 consecutive years. Thus, your total investment over 15 years would be ₹22,50,000. Calculated at the current interest rate of 7.1%, you would earn interest of ₹18,18,209, and a corpus of ₹40,68,209 at maturity.
How much additional income will you receive each year?
If you leave the maturity amount of ₹40,68,209 in your account, you will earn annual interest at the current interest rate. Calculated at the current 7.1% interest rate, this interest will amount to ₹2,88,842. Thus, without making any contributions, you can earn lakhs of rupees in interest every year.
Calculating this based on monthly income, you will receive ₹2,88,842 / 12 = ₹24,070 per month. This amount will continue to earn interest as long as it remains deposited.
Extension with Contribution Option
PPF also offers the option of extension with a contribution. However, you must apply for an extension before the completion of one year from the maturity date. An extension with a contribution extends the account for a straight five-year period. You can extend PPF as many times as you wish in blocks of five years.
Note: The PPF interest rate has been 7.1% for a long time, so the calculations here are based on that rate. However, the government reviews interest rates every three months, so this rate may change in the future.
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