PPF for Regular Income: Are you planning for a secure retirement and searching for a safe investment option that guarantees regular income after retirement? If yes, the Public Provident Fund (PPF) could be an ideal choice for you. This government-backed, long-term savings scheme not only offers fixed returns but also provides tax-free benefits under Section 80C of the Income Tax Act.
If you’re still wondering, What is PPF? How much interest will it generate? or How can you build a Rs 1 crore tax-free corpus along with Rs 60,000 per month interest income through this scheme? Then, here’s everything you need to know-
What is PPF?
The Public Provident Fund (PPF) is a government-backed savings scheme offering guaranteed returns and tax benefits under Section 80C of the Income Tax Act, 1961. It is a safe and secure investment option, perfect for individuals looking for long-term savings with tax advantages.
Investment Limit and Maturity Period
– Investment Limit: You can invest up to Rs 1.5 lakh per year in a PPF account.
– Maturity Period: The PPF has a 15-year maturity period. However, after the initial 15 years, you can extend your PPF account in 5-year blocks indefinitely.
Interest Rate
The PPF interest rate is currently 7.1 per cent per annum (subject to change by the government), which is higher than many other savings options available in the market.
Tax Benefits of PPF
The PPF scheme follows an Exempt-Exempt-Exempt (EEE) tax structure, which means:
1. Tax Deduction: Your annual investment of up to Rs 1.5 lakh is eligible for a tax deduction under Section 80C.
2. Tax-Free Interest: The interest you earn on your PPF investment is tax-free.
3. Tax-Free Maturity Amount: The maturity corpus, including both your principal and interest, is tax-free when withdrawn.
How to Build a Rs 1 Crore Retirement Corpus Through PPF?
If your goal is to accumulate a retirement corpus of Rs 1 crore, here’s how you can achieve it through PPF:
– Investment Duration: To create a Rs 1 crore corpus, you need to invest for 25 years. This includes the 15 years of the mandatory investment period and two extensions of 5 years each after maturity.
– Annual Investment: You must continue investing the maximum allowed amount of Rs 1.5 lakh every year for 25 years.
How Much Corpus Can You Generate After 25 Years?
Let’s see how much corpus you can build by investing Rs 1.5 lakh annually in PPF for 25 years:
– Total Investment: Rs 1.5 lakh x 25 years = Rs 37,50,000.
– Interest Earned: At an interest rate of 7.1 per cent per annum, your total interest earned would be Rs 65,58,015.
– Total Corpus: After 25 years, your total corpus would amount to Rs 1,03,08,015 (Rs 37,50,000 principal + Rs 65,58,015 interest).
What Happens After 25 Years?
Even after completing the 25-year investment period, you do not have to withdraw the money from your PPF account. The corpus continues to grow, and you can choose to:
– Leave the money in the PPF: If you don’t withdraw the money, your funds will continue earning interest.
– Annual Withdrawals: You can also choose to withdraw the entire amount or just the interest on a yearly basis.
How to Earn Rs 60,000/Month from PPF Interest?
If you keep your entire corpus of Rs 1,03,08,015 in the PPF account, you will earn interest of Rs 7,31,869 annually (at 7.1 per cent interest rate).
– Monthly Income: If you divide the annual interest of Rs 7,31,869 by 12 months, you will receive approximately Rs 60,989 per month.
– This monthly income is generated without touching the principal amount, and the full corpus of Rs 1,03,08,015 will remain intact in your account.
