You’ll be surprised to know that without investing a single rupee in the Public Provident Fund (PPF), you can earn a whopping ₹2.88 lakh in interest every year. This isn’t magic, but a unique feature of PPF that few people know about! Most people consider this scheme to be just a simple savings plan, but in reality, PPF is a powerful machine of compound interest. It’s a government-guaranteed, tax-free, and safe investment plan. Let’s understand this in-depth strategy and how you can turn PPF into a return machine.
Why is PPF the most reliable scheme
The Public Provident Fund (PPF) is a long-term savings scheme in which you can deposit a minimum of ₹500 to a maximum of ₹1.5 lakh annually. Currently, it offers an annual interest rate of 7.1%. This scheme falls under the EEE (Exempt-Exempt-Exempt) tax category, which means that the investment, interest, and maturity proceeds are tax-free. This is why PPF remains a stable and popular part of investors’ portfolios.
How to earn lakhs in interest without investing
This extraordinary benefit is realized after a maturity period of 15 years. Let’s say you deposited ₹1.5 lakh every year in PPF for 15 years.
Status after 15 years (at 7.1% interest rate):
Total Deposit: ₹22,50,000
Total Interest Earned: ₹18,18,209
Total Amount at Maturity: Approximately ₹40,68,209
The Magic of Extension Without Contribution
If you don’t withdraw this money after 15 years, your PPF account automatically goes into “Extension Without Contribution” mode. This means that your entire money will remain safe in the account and will continue to earn interest, even if you don’t make any new investments. No new application is required for this.
₹2.88 Lakh Annual Income
When your maturity amount of ₹40,68,209 remains in your account, it will generate an annual interest of ₹2,88,842 at the current interest rate of 7.1%. This interest amount will be completely tax-free. This way, you can earn lakhs of rupees in passive income every year without investing any new money. This substantial amount will continue to earn interest as long as it remains in the deposit.
Continue investing even after 15 years
If you wish, this option is also available. This is called “Extension with Contribution. “To do this, you must submit a form to the bank or post office within one year of the maturity date. By doing so, your account is extended for a block of 5 years. You can continue to extend it in 5-year blocks for as long as you wish.
Why is this scheme a favorite among the middle class
PPF has neither market risk nor tax concerns. Investing in it for the long term not only provides financial security but also generates passive income without any new investment. This is why every financial expert strongly recommends including PPF in your portfolio.