PPF Scheme: If you aspire to become a millionaire, this news could be significant for you. A formula for becoming a millionaire has been identified. Several investment schemes let you build a substantial corpus through regular contributions. One such option is the Public Provident Fund (PPF) scheme.
Investing in it offers numerous advantages, including tax benefits; furthermore, the maturity amount received is entirely tax-free. Let us explore how and how much you need to invest in this scheme to realise the dream of becoming a millionaire.
Interest Earned with Government Security
When it comes to safe investments, Post Office savings schemes are among the most popular. This is because the government itself guarantees the safety of every investment, whether small or large. It is essentially a zero-risk savings scheme. The government currently offers 7.1% per annum on PPF investments.
How Interest is Calculated
Understanding how interest is calculated is crucial if you plan to invest in this scheme. According to PPF account rules, interest on the deposited amount is calculated based on the balance maintained between the 5th and the last day of the month. Consequently, if you deposit funds into your PPF account between the 1st and the 5th of any month, you earn interest for that month as well.
Triple Tax Benefits
The PPF scheme offers a “triple benefit” structure. The first benefit is a tax deduction on the investment itself; under Section 80C of the Income Tax Act, you can claim a deduction of up to ₹1.5 lakh on the amount deposited in your PPF account. Secondly, the annual compound interest earned on your investment is tax-free. Third, the maturity amount received at the end of the term is also tax-free.
Maturity Period
The PPF scheme matures after 15 years. If you wish to extend the tenure, you can avail of the government’s extension facility. You can extend the scheme in 5-year blocks. Doing so allows you to maximise the benefits of interest, ultimately building a substantial corpus. As for investment limits in this government scheme, the maximum annual investment allowed is ₹1.50 lakh. This works out to an average monthly investment of ₹12,500.
How to Become a Crorepati with PPF
By using a specific investment strategy within the PPF scheme, this government plan can help you realise your dream of becoming a crorepati (millionaire). The calculation is quite simple. You need to invest ₹12,500 per month, which amounts to ₹1.50 lakh annually. Upon maturity after 15 years, your total principal contribution would be ₹22.50 lakh; with accrued interest of ₹18,18,209, the total corpus would stand at ₹40,68,209.
Upon Extending for 5 Years
If you extend the scheme twice for 5-year periods, the total corpus after the first 5-year extension would reach ₹66,58,288. Extending it for another 5 years brings the total investment tenure to 25 years. By this stage, the total principal deposited would be ₹37.50 lakh. The compound interest earned would be ₹65,58,015, for a total corpus of ₹1,03,08,015. Thus, you would become a crorepati.