Investment Plan: Nowadays, everyone seeks safe investment options. If you are among them, the PPF (Public Provident Fund) scheme could be an excellent choice. PPF is a scheme that allows you to build a substantial corpus through small, regular investments. Investing ₹10,000 per month results in an annual investment of ₹1.20 lakh, which falls well within the PPF’s maximum annual investment limit of ₹1.5 lakh.
Currently, the PPF offers an interest rate of 7.1%. Assuming this rate remains unchanged over the next 15 years, a regular monthly investment of ₹10,000 can help you build a fund worth lakhs. Your total investment over this period would amount to ₹18 lakh, and the interest earned alone would total ₹13.56 lakh.
What is the investment amount for ₹10,000 per month?
If you deposit ₹10,000 monthly into your PPF account, your annual investment will be ₹1.20 lakh. Depositing this amount consistently for 15 years results in a total investment of ₹18 lakh. Since the PPF investment limit is ₹1.5 lakh per year, this amount stays within the permissible limit. This means the principal amount deposited in your account over 15 years will be ₹18 lakh, with interest added on top based on the government-prescribed rate.
What will the return be?
If you invest ₹10,000 per month in PPF for 10 years at the current annual interest rate of 7.1%, your total investment will be ₹12 lakh. You could earn approximately ₹5.51 lakh in interest, resulting in a total corpus of around ₹17.51 lakh after 10 years.
What corpus will be generated at 7.1% interest?
The annual interest rate applicable to PPF is 7.1%. If you deposit ₹10,000 per month, the potential interest earned would be approximately ₹13.56 lakh. Consequently, after 15 years, the total corpus could reach around ₹31.56 lakh. This comprises ₹18 lakh in deposited capital and approximately ₹13.56 lakh in earned interest. Please note that the ₹31.56 lakh figure is not guaranteed; this calculation assumes the interest rate remains constant at 7.1% throughout the 15-year period.
PPF interest rates are subject to change.
PPF interest rates are determined by the government, which periodically reviews the rates for small savings schemes. Therefore, the 7.1% interest rate is not guaranteed to remain fixed. If interest rates decrease in the future, the final corpus could be lower; conversely, if rates rise, the corpus would increase. Thus, one should not view the estimated corpus as a fixed amount when making a long-term PPF investment.
How is interest calculated?
PPF interest is calculated based on the lowest balance available in the account between the 5th and the last day of the month. Depositing money at the beginning of the month can be advantageous; for instance, if a person deposits ₹10,000 before the 5th of the month, that amount can be included in the monthly interest calculation. Ultimately, the interest earned will depend on the amount in the account and the applicable rules.
What can be done after 15 years?
PPF accounts require an investment tenure of 15 years. Upon completion of this tenure, the investor has the option to extend the account. Under the rules, the account can be extended in blocks of five years. This is why the PPF serves as a long-term savings option. If your goal is to build a fund for major expenses—such as your children’s education or retirement—this strategy could be an excellent option for you. However, your investment decision should be based on the investment tenure and your specific needs.