Even a few years ago becoming a crorepati was a near impossible dream. Though the spread of the equity and mutual fund cult has made it easy for even lower middle-class people to become a crorepati through disciplined and long-term investing, becoming a crorepati around the time when one begins his/her career is a matter of great fortune. The point is one can make one’s kid a crorepati if one uses the Public Provident Fund or PPF prudently. Sounds incredible? Read on.
Account for minor
There is a provision that a PPF account can be opened in the name of a minor. It means a parent can open such an account soon after the birth of a child in his/her name. The account is to be operated by the parent or legal guardian, who can also get the income tax deduction benefits from the investments made into this account.
Break in monthly instalments
The maximum investment that one can make in a PPF account is Rs 1.5 lakh per annum. For the sake of convenience let’s break up this amount into 12 monthly instalments of Rs 12,500 each.
Crosses Rs 1 cr in 25th year
If a person keeps investing Rs 12,500 in this PPF account of the minor every month, in the 25th year, the sum that would accumulate in the account would exceed Rs 1 crore – Rs 1,03,08,014 to be precise.
Rate of interest
The only assumption is that the rate of interest in PPF would be 7.1% down the years. One should also remember that the PPF account opened in the name of the minor should be transferred to his/her name as soon as the person turns 18.
What is of significance is that the parent or legal guardian who would keep investing on behalf of the minor would derive the income tax deduction (according to Section 80C of the Income Tax Act 1961) of Rs 1.5 lakh per year. Therefore, the gains would be far more than the capital appreciation.
If the account is continued…
If the account holder continues to invest in the account at the same rate, he/she would run up a pool of Rs 7.25 crore when he/she turns 50. By the way, PPF is a completely safe mode of investment and is backed by sovereign guarantee.
Crores of Indians have used the Public Provident Fund as a means of building a corpus of fund that they can use in the later years of their lives. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
