PPF For Regular Income: How can you generate Rs 99,000/month tax-free income from Public Provident Fund?
Planning early for a regular income post-retirement is the best gift you can give to yourself. Now, the question arises, which would be a reliable investment scheme to invest in carefree, as there are plenty of schemes that people often get confused with? Well, you can consider exploring the Public Provident Fund, as it is a retirement-oriented scheme backed by the Indian government.
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PPF is a popular savings scheme that benefits people by providing guaranteed returns and tax benefits for up to 1.5 lakh investments in a year. Currently, it is offering an interest rate of 7.1 per cent, unchanged since April 2020. It is easy to open a Public Provident Fund account at a post office or bank, whichever suits you. Plus, you can start investing in it with as little as Rs 500. Thus, let's find out how it can help you earn Rs 99,000 a month in tax-free income.
Understanding Public Provident Fund (PPF)
PPF is a retirement-based scheme that you can also use for portfolio diversification. You can deposit Rs 1.5 lakh in a year. It also offers guaranteed returns and tax benefits under Section 80C of the Income Tax Act, of 1961. This small savings scheme is open to all individuals, including salaried and self-employed.
How much can you invest in PPF?
The minimum deposit in a financial year is 500, whereas the maximum is Rs 1.5 lakh.
Tax advantages of PPF
Contributions up to Rs 1.5 lakh in PPF are eligible for tax deductions under Section 80C, the interest earned and the corpus are also tax-free.
When can you withdraw your funds?
The maturity period is 15 years. After 15 years, the account holders can extend the account for unlimited blocks of 5 years each.
Can you withdraw PPF fund before maturity period of 15 years?
A PPF account holder is allowed to take 1 withdrawal during a financial year after 5 years. It does include the year of account opening (if the account is open during 2023-24, the withdrawal can be taken during or after 2029-30).
How much can you withdraw at end of preceding year?
One can withdraw 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. (i.e., withdrawal can be taken in 2023-24, up to 50% of the balance as of 31.03.2023 or 31.03.2023, whichever is lower).
What happens to PPF account after 15 years?
After 15 years of the maturity period, investors can continue their accounts with or without deposits.
How to earn Rs 99,000 income a month from PPF?
To build Rs 99,000 a month from PPF, you have to begin with a Rs 1.50 lakh investment every financial year and continue it till the maturity period of 15 years. To get the maximum benefit of interest, the investment should be made between April 1-5 every financial year.
What will be your PPF corpus after 15 years?
The investment amount in 15 years will be Rs 22,50,000, the estimated interest will be Rs 18,18,209, and the estimated maturity will be Rs 40,68,209. The investor can take an extension of 5 years and keep investing Rs 1.50 lakh a year in the same way as before.
What will be your PPF corpus after 20 years?
In 20 years, the total investment will be Rs 30,00,000, the estimated interest will be Rs 36,58,288, and the estimated corpus will be Rs 66,58,288. At this stage, the investor can take another extension of 5 years and continue the practice of investing Rs 1.50 lakh a year.
What will be PPF corpus after 25 years?
In 25 years, the total investment will be Rs 37,50,000, the estimated interest will be Rs 65,58,015, and the estimated corpus will be Rs 1,03,08,015.
What will be PPF corpus after 31 years?
In 31 years, the total investment will be Rs 46,50,000, the estimated interest will be Rs 1,20,58,575, and the estimated corpus will be Rs 1,67,08,575.
What next after 31 years of investment?
From here onwards, investors can start withdrawing interest on the entire corpus. During extensions, the account holder is allowed to withdraw the interest amount once a year.
What will be your interest amount?
At a 7.1 per cent interest rate, the interest in a year will be Rs 13,92,381, which will be equal to Rs 99,000 a month.
(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning)
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