The Public Provident Fund (PPF) is a popular choice among risk-averse investors. If you’re one of them, this article is worth reading. A PPF can help you generate a regular, tax-free income stream from your investment. Therefore, let’s explore how you can create a tax-free income of over Rs 7 lakh per year using a PPF.
Introduction to Public Provident Fund
PPF is a safe way to save for your future. In this investment scheme, you can invest up to Rs 1.5 lakh annually and claim a tax deduction under Section 80C of the Income Tax Act. You can open a Public Provident Fund account at a bank or post office. Anyone can open an account, whether you’re working, self-employed, or a parent wanting to save for your child’s future.
What is the minimum investment amount in PPF?
To keep your Public Provident Fund account active, you need to deposit a minimum of Rs 500 in a year. The maximum amount you can deposit in a year is Rs 1.5 lakh.
What is the maturity period of the PPF account?
The maturity period of a Public Provident Fund account is 15 years. But you don’t have to close it after the completion of 15 years. You can extend it for another 5 years, and then another 5 years, and so on – for as long as you want.
How can you enjoy Tax benefits in PPF?
When you invest in PPF, you can claim tax benefits on deposits up to Rs 1.5 lakh. Plus, the interest you earn and the final amount you receive are completely tax-free.
Can you withdraw money from the PPF account before the maturity period of 15 years?
You can withdraw money from your PPF account, but only after 5 years from when you opened it. And, you can only make one withdrawal in a year. For example, if you opened your account in 2024-25, you can withdraw money from 2030-31 onwards.
How much can you withdraw at the end of the preceding year?
When you withdraw money from your PPF account, you can take out up to 50 per cent of the balance. But, there’s a catch – the balance is calculated from 4 years ago, or the previous year, whichever is less.
What happens to the PPF account after 15 years?
After your PPF account matures in 15 years, you have two options: you can either keep adding money to it or just let it be, without making any further deposits.
How to get over Rs 7 lakh/year from PPF?
To generate over Rs 7 lakh/year from PPF, one has to begin with a Rs 1.50 lakh investment every financial year and continue it till the maturity period of 15 years. To get the maximum benefit of interest, the investment should be made between April 1-5 every financial year.
What will be the PPF corpus after 15 years?
The investment amount in 15 years will be Rs 22,50,000, the estimated interest will be Rs 18,18,209, and the estimated maturity will be Rs 40,68,209. The investor can take an extension of 5 years and keep investing Rs 1.50 lakh a year in the same way as before.
What will be the PPF corpus after 20 years?
In 20 years, the total investment will be Rs 30,00,000, the estimated interest will be Rs 36,58,288, and the estimated corpus will be Rs 66,58,288. At this stage, the investor can take another extension of 5 years and continue the practice of investing Rs 1.50 lakh a year.
What will be the PPF corpus after 24 years?
In 24 years, the total investment will be Rs 36,00,000, the estimated interest will be Rs 58,74,664, and the estimated corpus will be Rs 94,74,664.
What is the next step after 24 years of investment?
After 15 years, you can start taking out the interest earned on your entire investment. If you extend your account, you can withdraw the interest amount once every year.
What will be your interest amount or regular income/year?
At a 7.1 per cent interest rate, the interest in a year will be Rs 7,89,555.
(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning)
