Since it was launched in 1968, PPF (Public Provident Fund) has been one of the very choices for a person to accumulate sizeable funds for post-retirement expenses. Till National Pension System (NPS) came into the picture in 2009, PPF was the only scheme apart from the Employees’ Provident Fund (EPF) that allowed anyone to accumulate wealth for advanced years.
PPF Calculator
Even after NPS has gained popularity and equity/mutual fund cult exploded on the scene over the past few years, PPF remains a preferred choice for millions. Let’s see how it generates a significant corpus with moderate contributions down the years.
PPF Investment Rs 50000 a year
Let’s take the example of a person who cannot invest more than Rs 50,000 a year in his/her PPF account. If one starts investing at the age of 25 and does not raise the investment down the years, he/she would amass Rs 75,65,952 (or Rs 75.65 lakh) at the age of 60.
PPF Investment Rs 75000 a year
Let our investor raise his/her investment by Rs 25,000 a year. So, his/her investment now stands at Rs 75,000 a year. If this amount is put in the PPF account at the beginning of each financial year, it will generate a total amount of Rs 113,48,929 (Rs 1.13 crore) after 35 years or the age when he/she turns 60.
Investing Rs 1 lakh a year
Let’s keep raising the investments by Rs 25,000 and see what the total amount becomes on maturity. If Rs 1 lakh is invested each year for 35 years, the amount would stand at Rs 1,51,31,905 (Rs 1.51 crore).
One can raise the investment in PPF to a maximum of Rs 1.5 lakh a year. The points to note are that we have assumed that the rate of interest remains steady at 7.1% which is the current rate. Moreover, the amount is invested at the beginning of each financial year for the full impact of the interest.
Returns actually higher
Also remember, one can use a PPF account as a source of regular pension if the amount in it becomes significant. The actual returns turn out to be higher since PPF offers a full exemption from income tax on the principal, interest and maturity amounts.
As the name implies, the Public Provident Fund (PPF) was designed to encourage very long-term savings among the common people. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
