Fifty-six years ago in 1968, the National Savings Institute of Union Finance Ministry launched Public Provident Fund, or the PPF, that has survived the transformation of India from a controlled economy to a market-based one. To popularise the scheme, the Centre had sweetened it with income tax benefits that survives to this day.
PPF falls in that category of instruments where the Union finance ministry reviews the rate of interest once every 3 months. The current interest rate in PPF is 7.1% per annum and has remained at that level since April 2020. In other words, the rate of interest has remained unchanged close to 5 years now.
How much will I get after 15 years in PPF
Whether you should invest in any particular investment instrument, significantly depends on how much returns will it generate over time and under what conditions of parameters such as risk, liquidity etc. PPF calculators are available online and free of charge. Anyone can use it with little difficulty to find out how much returns it will generate for a given investment amount.
For convenience, let’s assume that a person invests as little as Rs 100 in a PPF account. It is indeed a small amount – equal to the cost of 1 packet of mass-market cigarette brands. At this rate one invests Rs 36,500 in a year. Let’s proceed to calculate the returns on a period of 15 years, which is the lock-in period of PPF. Calculators show that the total returns at this rate of investment for 15 years is close to Rs 10 lakh. The actual figure is Rs 9,89,931 on a nominal investment of Rs 5,47,500 from the pocket. The interest income, therefore, works out to Rs 4,42,431.
PPF returns in 25, 30 years
Since a PPF account need not necessarily be closed after 15 years and can be extended by multiples of 5 years, let’s see what the returns are if it is stretched for 25 and 30 years. In 25 years, effective investment at Rs 100 a day will fetch Rs 25,08,284. The interest component will be Rs 15,95,784 on a nominal investment of Rs 9,12,500. If continued for 30 years, the PPF account will generate a total amount of Rs 37,599,22 – generating interest of Rs 26,64,722 on a principal of Rs 10,95,000.
Public Provident Fund, or PPF, is one of the most trusted long-term guaranteed-return investment instrument that carries a sovereign guarantee as well as income tax benefits and is open to everyone. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
