PPF for Regular Income: Public Provident Fund (PPF) is often used for the diversification of retirement corpus. It’s a non-market-linked, fixed interest rate, small savings scheme that can provide long-term stability to a retirement corpus. Investors can use it in a mix with market-linked investment options to consolidate their retirement portfolio. If used as a long-term investment option, a PPF investment can not only create an income tax-free retirement corpus, but it can also provide an option to generate a tax-free lifelong income. A Rs 1,50,000 annual investment in PPF for a long time can help one generate a tax-free retirement corpus of over Rs 1 crore and a lifelong monthly income of nearly Rs 43,000. Know how it may be possible!

PPF investment for retirement planning 

PPF offers a 7.1 per cent interest rate compounded yearly.

The PPF account can be opened in a post office or a bank.

One can deposit a minimum of Rs 500 and a maximum of Rs 1.50 lakh in a financial year in their PPF account. 

How to get maximum advantage from PPF deposit

If one deposits in PPF between April 1 and 5, they will get the maximum advantage of a 7.1 per cent interest rate on their PPF investment. The interest is credited on March 31 of every financial year. 

Tax-free status of PPF

Deposits up to Rs 1.50 lakh in a financial year (for old regime taxpayers), the interest earned, and the retirement corpus are tax-free in PPF.

PPF maturity period

PPF has a maturity period of 15 years. After 15 years, an account holder can either withdraw the amount, or they can extend the account for further blocks of 5 years with or without investment.

PPF withdrawal rule during extended period 

During the extension period, an account holder can make 1 withdrawal in each financial year subject to a maximum limit of 60 per cent of the balance credit at the time of maturity in the block of 5 years.

How to get tax-free corpus, lifelong monthly income from PPF

Here, they need to invest Rs 1.50 lakh/year for 31 years. After that period they can withdraw 60 per cent of their corpus and let the remaining amount grow to withdraw nearly Rs 43,000 monthly from the next financial year.

Let’s see how this maths will work.

PPF corpus in 31 years

In 31 years, the total investment in 31 years will be Rs 46,50,000, estimated interest will be Rs 1,20,58,575, and the estimated maturity will be Rs 1,67,08,575.

Tax-fee corpus after 60% withdrawal

After 31 years, a 60 per cent withdrawal from a corpus of Rs 1,67,08,575 will be Rs 1,00,25,145.

This amount will be tax-free.

After this withdrawal, the remaining amount will be Rs 66,83,430. 

Since we have exhausted our withdrawal limit for the year, we can’t withdraw for one financial year, but we will get a 7.1 per cent on the remaining corpus.

Corpus for lifelong monthly income

The interest earned on a Rs 66,83,430 corpus will be Rs 4,74,523.53.

So, the corpus after a year will be Rs 71,57,954.

This amount can be used to draw a monthly income.

Interest from Rs 71,57,954 corpus

Now from this stage, we will withdraw just the interest amount from the corpus.

At a 7.1 per cent interest rate, it will be Rs 5,11,794.

On a monthly basis, it will be Rs 42,649.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)