PPF For Regular Income: How you can get Rs 49,000 tax-free lifelong monthly income; Rs 78 lakh tax-free corpus at 55 years of age from Public Provident Fund

Public Provident Fund for investment: Public Provident Fund (PPF) is mostly used for long-term investment and diversification of an investment portfolio. It is a fixed interest rate investment scheme that offers a 7.1 per cent interest rate compounded yearly. The account comes with a maturity period of 15 years, which can be extended for unlimited blocks of 5 years each. In the long term, the scheme may be used not only to generate a tax-free retirement corpus but also a tax-free income per month.

Likewise, a regular investment in PPF can generate an estimated tax-free corpus of Rs 78,00,000 at 55 years of age and a monthly lifelong income of Rs 49,000 from the next year. Know how it may be possible. 

PPF account- Minimum and maximum deposits

A PPF account can be opened in a bank or a post office with a minimum investment of Rs 500.

This is also the minimum deposit amount that is used to continue the PFF account.

The maximum deposit in a financial year is Rs 1.50 lakh. 

PPF withdrawal conditions

The account comes with a maturity period of 15 years, but 1 withdrawal every financial year is allowed after 5 years, excluding the year of account opening. 

The withdrawn amount should be up to 50 per cent of the balance at the credit at the end of the 4th preceding year or at the end of the preceding year, whichever is lower.

PPF maturity rules

After a maturity period of 15 years, the entire PPF amount can be withdrawn. 

If the account holder wants, they can extend the account for unlimited blocks of 5 years each.

During the extension, they may or may not contribute to their PPF account. 

However, in either case, they will keep getting the interest amount. 

PPF withdrawal rules after maturity

In an extended account without deposits, the PPF interest rate will be applicable, and the payment of any amount can be taken any time or can take 1 withdrawal in each financial year.

In an extended PPF account with deposits, 1 withdrawal can be taken in each financial year subject to a maximum limit of 60 per cent of the balance credit at the time of maturity in the block of 5 years.

PPF calculations for story

We will calculate how a regular investment in PPF can generate an estimated tax-free corpus of Rs 78,00,000 at 55 years of age of an investor and how they may get an estimated monthly income of Rs 49,000 for life from the next year.  

Rs 1.5 lakh investment in PPF for 15 years

An account holder can make a Rs 1,50,000 investment every financial year between April 1-5 for 15 years.

In 15 years, the total investment will be Rs 22,50,000, estimated interest will be Rs 18,18,209, and the estimated corpus will be Rs 40,68,209.

3 PPF extensions of 5 years each

From this point, the PPF account holder needs to extend their account 3 times in a row- for a total of 15 years with 5 years of each block. 

Look at how their corpus will look after every 5 years. 

In 20 years, the total investment will be Rs 30,00,000, estimated interest will be Rs 36,58,288, and the estimated corpus will be Rs 66,58,288.

In 25 years, the total investment will be Rs 37,50,000, estimated interest will be Rs 65,58,015, and the estimated corpus will be Rs 1,03,08,015.

In 30 years, the total investment will be Rs 45,00,000, estimated interest will be Rs 1,09,50,911, and the estimated corpus will be Rs 1,54,50,911.

What they may need to do

From that point, they can take a further extension of 5 years but stop investing.  

At that stage, they may withdraw their 50 per cent PPF corpus.

The estimated withdrawn corpus thus will be Rs 77,25,455.5.

Here, if a person starts their PPF investment at 25 years of age, they may withdraw this amount at 55 years of age.

Let corpus grow for 1 year

Now, they may let the corpus of Rs 77,25,455.5 grow at a 7.1 per cent interest rate for a year.  

The interest on this amount will be Rs 5,48,507.34.

The accumulated corpus, thus, will be Rs 82,739,628.4.

What they need to do from here

If they just withdraw the interest amount from this corpus, the yearly withdrawal can be Rs 5,87,451.36, which will be equal to Rs 48,954.28. 

This income they may get for life from the age of 56 years.

What will happen to their PPF corpus?

Since they are not contributing to their PPF account during extension periods, they can withdraw the entire amount during their life or may leave it for the nominee after death. 

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)