Public Provident Fund calculation chart: How to get Rs 43 lakh, save income tax
If the current rate of interest remains in force, then a person can accumulate over Rs 43 lakh by investing Rs 1.5 lakh a year in the mandatory 15-year lock-in period.
Public Provident Fund (PPF) Investment: Budget 2019 announcements have made it easy for individuals to pay zero tax on a taxable income up to Rs 6.5 lakh. It is also logically possible to pay zero tax for higher taxable incomes by investing in several tax-saving instruments. However, for a taxable income up to Rs 6.5 lakh, one can keep the taxmen at bay by simply investing Rs 1.5 lakh per year in a financial instrument enjoying benefits under Section 80C of the Income Tax Act. Public Provident Fund (PPF) comes across as one of the best options for doing this.
Currently, PPF offers a fairly high-interest rate of 8 per cent, which is compounded annually. Thanks to the power of compounding, it is also one of the safest financial tools that may help investors become crorepati over a period of time. PPF account comes with a lock-in period of 15 years. However, it can be extended further in blocks of five years each.
If the current rate of interest remains in force, then a person can accumulate over Rs 43 lakh by investing Rs 1.5 lakh a year in the mandatory 15-year lock-in period. One can save this amount of Rs 1.5 lakh by saving just Rs 416 a day, or Rs 12,500 a month in a year. The best time for PPF investment, for maximum returns, is the first week of April.
The following chart shows how your investment of Rs 1.5 lakh per year in the PPF account will grow over a period of 15 years assuming there is no change in the rate of interest:
*Source: Zee Business Online
PPF account is in the "EEE" category. This means, there is no tax on the invested amount, interest earned as well as the amount withdrawn after maturity.
Watch This Zee Business Video
If you do not want to invest in PPF beyond 15 years but want to continue the account without withdrawing the maturity amount, then also you will continue to earn the applicable interest rate.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.