Public Provident Fund, popularly referred to as PPF, is a true public servant. Anyone can open a PPF account and start investing in for the sake of one’s financial security. While anyone above 18 can open an account, the parents or legal guardians of a minor can also open one in the name of their minor.
PPF calculator: More than 50 years of investment possible
The result: one can invest for a very long period of time spanning more than half a century. Many senior citizens of India are grateful to PPF for their monthly cash flow in
If one can continue investment for a really long period of time, PPF can build a really big corpus for you. But is it possible to craft a pool of Rs 2 crore via PPF? Doesn’t the amount Rs 2,00,00,000 appear too big?
How to approach Rs 1 crore
Actually, it is quite possible. Let’s check the numbers.
Suppose a young person begins investing Rs 1.5 lakh a year into a PPF account. He/she has to keep investing beyond the lock-in period of 15 years in Public Provident Fund.
If someone investments Rs 1.5 lakh a year – or, Rs 12,500 a month – for 15 years, the amount accumulated is Rs 40,68,209.
Far cry after 15 years
But it is only 25% of our target corpus of Rs crore. How can PPF deliver Rs 2 crore?
For a moment let’s believe in the power of compounding, which ensures the amounts rise rapidly with the passage of time.
For example, if one has the tenacity and discipline to continue the investments for 25 years, the amount will turn out to be well over Rs 1 crore – Rs 1,03,08,015 to be precise.
Task three-fourths accomplished
If one extends the investment to five more years, the corpus will rise to Rs 154,50,911, or more than Rs 1.54 crore.
In the 33rd year, the corpus reaches close to Rs 2 crore – Rs 1,94 98,127.
Rs 2 crore exceeded
On the completion of the 34th year, the amount crosses Rs 2 crore resoundingly, touching nothing less than Rs 2,10,43,144 (Rs 2.10 crore).
All along we have assumed that the interest rate of PPF remains 7.1%. Any upward movement in the interest rate will only raise this amount further.
Effective return higher
The returns are actually higher since the Income Tax Act 1961 allows you tax exemption every financial year depending on the amount you invest in PPF. And the entite maturity amount is free from income tax.
The Public Provident Fund has assisted millions of Indians to build a corpus for benefit in the advanced years of life. It is completely safe and fully tax-exempt. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
