PPF Fund : Actually, if you invest regularly in PPF for 25 years, you can build a retirement fund of ₹1 crore. In PPF, you get the option to invest from ₹500 up to ₹1.5 lakh per year.
PPF Interest Rate: PPF can help you build a ₹1 crore fund
Public Provident Fund (PPF) is considered one of the best long-term investment options. Investing in PPF also helps in saving income tax. The Ministry of Finance’s National Saving Institute launched PPF in 1968. The main objective was to promote small savings and provide tax benefits.
Through PPF, if you invest regularly for 25 years, you can build a retirement fund of ₹1 crore. You can invest from ₹500 to ₹1.5 lakh annually. PPF is considered an excellent investment option for salaried individuals as well as self-employed people.
You can keep your PPF account active for up to 25 years
A PPF account has a maturity period of 15 years. But if you want to continue it further, you can extend it in blocks of 5 years.
If you deposit a small amount every year for 15 years, you will accumulate a good amount at maturity. After 15 years, you can either close the account or extend it for two more 5-year blocks (total 10 years).
What is the interest rate on PPF?
The interest rate on PPF is decided by the Government of India and is reviewed every three months. Generally, the yearly interest rate remains between 7% and 8%. The interest is calculated on an annual basis.
Currently, the PPF interest rate is 7.1%.
Benefits of investing in PPF
If you plan to invest in PPF, you should know the major benefits:
- The amount deposited, the interest earned, and the maturity amount are all 100% tax-free under Section 80C of the Income Tax Act.
- PPF is a government-backed scheme, making it one of the safest investment options.
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There is no risk involved in investing in PPF.
How you can build a ₹1 crore fund with PPF
PPF interest is added at the end of each financial year. If you want to earn maximum interest, deposit your full yearly amount (₹1.5 lakh) on 1st April every year.
Example:
If you deposit ₹1,50,000 on 1 April, you will earn interest throughout the year. With the current interest rate, you will receive ₹10,650 as interest next year.
So the total balance will become ₹1,60,650.
Interest of ₹18.18 lakh in 15 years
If next year you again deposit ₹1,50,000, the total balance becomes ₹3,10,650.
On this amount, you will earn interest of ₹22,056 at the end of the year.
By depositing ₹1.5 lakh every year on 1 April, after 15 years:
- Total investment: ₹22.50 lakh
- Total interest earned: ₹40.68 lakh
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Total maturity amount: ₹63.18 lakh
Total ₹1.03 crore after 25 years
If you extend your PPF account for 5 more years after the first 15 years:
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Your investment of ₹30 lakh grows to ₹66.58 lakh,
out of which ₹36.58 lakh is interest alone.
If you extend it again for another 5-year block (total 25 years):
- Your total investment becomes: ₹37.50 lakh
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Total interest earned: ₹65.58 lakh
Thus, you get a total maturity amount of ₹1.03 crore after 25 years.