Kolkata: When PPF (Public Provident Fund) was launched in 1968, the objective was to channelise small contributions from households into long-term investments. Even those who did not have any employment, could hope to build a neat corpus with this instrument. Investment experts have advised for long that anyone looking for a safe investment option to earn guaranteed returns with the advantage of tax saving should opt for PPF.
The initial lock-in period of PPF account is 15 years. One of the features of PPF is that one can open it for a minor too. If the minor continues it after he/she grows up, it can keep multiplying the investments for a really long period of time. But even if one opens a PPF account after he/she begins earning, one can reach Rs 1 crore with ease. The only requirement: disciplined investment down the years.
How do you get Rs 1 crore in PPF
It is difficult to believe that one can accumulate more than Rs 1 crore in PPF — an instrument that lacks the high returns sometimes one can make in equities or mutual funds. However, if you throw in a liberal dose of discipline in PPF, it can produce very definite results, And since the instrument carries guaranteed returns and a sovereign guarantee, you can do it with certainty. Let’s see how. Will you believe that if one can invest a modest Rs 4,000 a month in a PPF account, one can accumulate Rs 1,05,31,091 in 40 years. If you can raise the investment a bit to Rs 5,000 and continue it for 37 years, the amount in the PPF account will be Rs 1,05,47,231.
Consider another scenario. The parents of a child opens a PPF minor account in the very first year of a child. Assume the parents invest Rs 2,000 only in it every month. Let’s also assume that the child continues the investment after he/she grows into an adult and starts earning. Would you believe that with this meagre investment, the PPF account will accumulate more than Rs 1 crore — Rs 1,08,12,158 actually — after 50 years, or when the child turns 50. The long period of compounding does the trick. In fact, even Rs 1,900 a month in a PPF account can generate more than Rs 1 crore in 50 years.
How much will I get after 15 years in PPF?
The initial lock-in period of PPF is 15 years. let’s see how much can one get in 15 years with an annual investment of Rs 1.5 lakh, which is the maximum one can make in a financial year (according to Section 80C of the Income Tax Act). If you invest Rs 1.5 lakh a year, and do so for 15 years, you will get a total maturity value of Rs 40,68,209. However, it is always advisable that one takes the help of a personal finance adviser to determine when would he/she open a PPF account and how much would he/she contribute to it. One can invest a maximum of Rs 1.5 lakh in a PPF account in a financial year.
Despite a lot of challenges in recent years, Public Provident Fund, or PPF, has retained a lot of its earlier zing. Very long term compounding, income tax deductions, a significant interest rate and complete safety of capital make the instrument tick. If you take a long hard look at the PPF calculator, making Rs 1 crore does not appear that difficult. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
