New Delhi: Though rooted in the controlled economy, Public Provident Fund, or PPF, has defied the widely changing dynamics of the investment world and has retained its popularity significantly in an age when a number of investors have gravitated towards equities and mutual funds thanks to their superior rates of return.
The PPF is an instrument that bears the longest lock-in period – normally it is 15 years. The PPF investment matures 15 years after opening the account. However, investment strategists advise common people to stay invested for a longer tenure. Fortunately, PPF rules allow one to stretch the investment tenure in multiples of 5 years. Interestingly, if you continue to make the same investment in a PPF account, what you generate after 35 years can be 5.5 times the corpus you can build if you invest for 15 years. Let’s try to understand with the help of a PPF calculator.
PPF calculator: How much will I get after 15 years?
Say a person who starts earning at the age of 25 years, opens a PPF account and starts investing the maximum possible amount of Rs 1.5 lakh in it every year. If he continues this for 15 years, he/she will generate a total amount of Rs 40.68 lakh, of which Rs 22.50 lakh will be principal and Rs 18.18 lakh will be the interest component. It will make a total amount of Rs 40.68 lakh that will be paid at the end of 15 years if the investor decides to close the account.
How much will I get after 35 years in PPF?
Now think of a situation when prudence prevails and the investor continues the PPF investment for 35 years, instead of 15 years ie, till he/she turns 60. In this situation, the investor will create a corpus of more than Rs 2.26 crore. Of this amount, Rs 52.50 lakh will be the nominal principal paid by the investor which will generate an interest of more than Rs 1.74 crore.
Is PPF free from income tax?
The only assumption is that the interest rate in PPF remains at the current rate of 7.1 per cent. The most interest point is that one does not have to pay any income tax on PPF at all since it falls in the EEE (exempt-exempt-exempt) category. A PPF account can be opened in PSU banks and some private sector banks as well as post offices.
The Public Provident Fund, or PPF, is an instrument that has earned the trust of generations of Indians who continue to swear by it even in this equity and mutual fund frenzy. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today