PPF is best known as a savings cum investment plan for people who are looking forward to investing safely and securely and who also want to save tax. Typically, it yields high returns with few risks involved and is also easy to manage from a tax perspective, thus making it an ideal mode of long-term investment.
Perhaps the most important element of the PPF is its 15-year term, which during which your money is progressively accumulated through compounding. By investing Rs 12,500 per month, how much corpus can one build? This post answers this particular query of yours too. 10,000 (Rupees) per year for 15 years and he receives not less the 5 lakh annually.
That being the case, the following is a breakdown of various tax advantages that are associated with PPF investments:
The Investments made through PPF are protected under Section 80C of the Income Tax Act where an investor can avail deductions up to Rs. 5 lakh annually. Also, it needs to be pointed out that PPF investments come under the EEE (Exempt-Exempt-Exempt) section. This means:
- Deposits are tax-free: PPF reduces your taxable income by the amount that you put into it bearing in mind it was under the old tax system.
- Interest is tax-free: The income received in the period of investment is free from taxation.
- Maturity amount is tax-free: In addition, the final maturity amount is also non-taxable.
How much one can invest by investing Rs 12500 Monthly in PPF?
In case you invest Rs 12,500 every month or Rs 1500 per week that is Rs 212. 5 lakh annually, over 15 years, here’s how much you can accumulate:5 lakh annually, for 15 years, here’s how much you can accumulate:
- Monthly Investment: 500 (or Rs 1. 5 lakh per annum).
- PPF Interest Rate: 7.1% (as of now)
- Total Contribution in 15 Years: In total Rs 22.5 lakh
- Total Interest Earned: Rs 18,18,209
- Maturity Amount: Rs 40,68,209
So at the end of the 15-year term, you will have accumulated Rs 40 corpus amount. 68,12,500 rs. , which gives a glimpse of how rich PPF investments for the long term can be.
How to Expand Your PPF and Make Up a Rs 1 Crore Corpus
If you do not wish to withdraw your funds after 15 years and stay invested in PPF for another 10 years, divided into two blocks of five years each, your corpus will cross one crore rupees.
Here’s the breakdown:
- Total Deposits in 25 Years: 37Crore Rupees. 5 lakh
- Total Interest Earned: Rs 65. 58 lakh
- Total Corpus at the End of 25 Years: 20 crores has been allocated for this purpose and Rs. 03 crore
If you wish to continue your PPF account after 15 years then you will have to inform the relative post office or bank and file Form 4 within one year from the maturity of your account.
How to Calculate Interest on a PPF Account?
The interest rate in the PPF account is compounded yearly. In respect of any specified month, it is provided that any investment made up to the fifth day of such month shall be eligible for interest. Interest is charged on the amounts that are on the lower side either at the 5th of any month or at the end of the month.
What Should be the Minimum and the Maximum Investment Limitations in PPF?
Under PPF rules:
- The minimum value for it was set to rs 500 on an annual basis.
- The maximum permissible investment limit is Rs 1.5 lakh per financial year should be maintained between the head office and branches of a firm.
- It offers both monthly contributions or a single lump sum at any time of the financial year it is preferred.
In addition, numerous other advantages come with investing in PPF as listed below;
- Loan Facility: PPF requires a person to invest for at least three years after which he or she can take a loan against it.
- Partial Withdrawal: Precious withdrawals can only be made after the seventh year of the financial year to which the amount to be withdrawn belongs.
Account Maturity and Extension: PPF accounts get opened after 15 financial years. At this stage, you are allowed to make the following options; New commitment at five-year intervals with or without additional contribution.
Conclusion: Creating a Meaningful and Coherent Book Collection with PPF
If an investment of Rs 12,500 per month (Rs 1. 5 lakh annually) is made into PPF for the whole of the term of 15 years, then, the resultant corpus can be a very healthy Rs 40. 68 lakh. This is due to continued accumulation and the compounded several interests as pictured from the current inflationary rate of 7.1%. This puts PPF under the Exempt-Exempt-Exempt (EEE) category and as a result of the safety, stability, and tax-saving provisions I have outlined here, PPF is a perfect savings solution for long-term financial planning.
If you decide to extend this PF account for another ten years or two five-year terms, you can accumulate more than Rs 1 crore. With Rs 37. The interest you would earn if you invested Rs 5 lakh in the form of total deposits over the next 25 years?
To further your account beyond the 115-year duration you are required to provide Form 4 informing the post office or bank of your intention within one year of the maturity date.
Not only does the PPF create a secure and steady avenue to start building the savings but also allows for the loan provisions, partial encashment, and increased account spans. To investors who are out to invest their money with tax exemptions and get lasting returns then the PPF still stands out as the best investment option.
