Everyone wants to save and invest a part of their earnings in a place where their money is safe and they also get good profits. In such a situation, post office savings schemes have always been the first choice of the people. One of these is the Public Provident Fund (PPF), which is most popular among people who want low risk and a free investment. Not only does it give a great interest of 7.1%, but a large fund is also created by investing in a regular PPF.
Tax-free interest and 15-year lock-in
Under the Public Provident Fund (PPF), the government is giving PPF interest rate to investors at the rate of 7.1% per annum, which is completely tax-free. This government scheme is a boon for those who fall in the high tax bracket, because the entire profit received in PPF is tax-free. It has got the status of EEE (Exempt-Exempt-Exempt), which simply means that the investment made in it, the interest received on it, and the entire amount received on maturity, all three are tax-free. This scheme has a lock-in period of 15 years, which promotes a disciplined saving habit.
Start investing in PPF with just ₹500
The Government of India itself guarantees the safety of your investment in the Post Office PPF scheme, and you can start investing in PPF with just a small amount of ₹500. A lump sum investment of up to ₹1,50,000 can be made in a PPF account in a financial year. The special thing about this government savings scheme is that if you want to continue investing even after the lock-in period of 15 years, you can extend it for every 5 years.
How to create a huge fund of ₹ 40 lakh in 15 years
Now, let’s talk about how investors can create a fund of ₹ 40 lakh on maturity of 15 years through this scheme. Suppose you invest a maximum of ₹ 1.5 lakh every financial year. For this, you have to save about ₹ 12,500 from your earnings every month. If you deposit it continuously for 15 years at an interest rate of 7.1%, then your total deposit amount will be ₹ 22,50,000. At the same time, the guaranteed return on this will be ₹ 18,18,209. This means that your total fund will be ₹ 40,68,209 in the maturity period. You can increase or decrease the investment amount as per your convenience.
Facility of loan and withdrawal also
A PPF account can be opened in any post office or bank. It also provides a loan facility on investment, and a loan can be applied for after the end of the financial year of the initial investment. Not only this, but a partial withdrawal facility is also available after five years of opening a PPF account. For example, if you opened the account in 2020-21, then you can make a partial withdrawal after 2026-27. This scheme provides you with long-term savings as well as financial assistance when needed.