PPF: How this Post Office scheme gives you chance to build over Rs 1 cr corpus?
PPF: Post Office guaranteed return schemes are popular since they give non-market-linked, risk-free returns. People use them to get monthly, quarterly, or annual returns, or build a retirement corpus These investment schemes are known to give steady returns, but they are hardly considered as options to generate a corpus running into crores. But if you consistently invest in a Post Office scheme such as Public Provident Fund (PPF), which gives you a compound annual interest of 7.1 per cent, in the long run, not only can you save considerable taxes, but you can also build a corpus of over Rs 1 crore. Know how-
Public Provident Fund (PPF): When we think of guaranteed return Post Office schemes, we think of investment options that offer a steady monthly, quarterly, or yearly income, or help one build a retirement corpus. We hardly consider them as schemes that may help one generate a corpus running into crores. But achieving the retirement goal of Rs 1 crore is possible even in post office investment schemes such as Public Provident Fund (PPF). If one is consistent and invests in the PPF scheme for years, they can achieve the financial goal of becoming a crorepati. We will let you know how it is possible through calculations. Before that, let's go through the basic features of PPF and how it works.
What is PPF?
PPF is a savings scheme that post offices and banks offer.
The scheme is non market-linked, risk-free, and provides guaranteed returns with a 7.1 per cent annual interest rate.
One can open an account with a minimum investment of Rs 500 and a maximum investment of Rs 1.50 lakh in a financial year.
The Rs 1.50 lakh limit also includes deposits made in his/her own account and in the account opened on behalf of a minor.
The scheme provides 7.1 per cent compound interest annually.
PPF: Deposits
One can make deposits in any number of installments in a financial year in the multiples of Rs 50 and a maximum up to Rs 1.50 lakh.
PPF: Tax Benefits
Deposits made under the PPF schemes are tax-exempt up to a maximum limit of Rs 1.50 lakh under Sector 80C of the Income Tax Act.
The investment scheme falls under the Exempt-Exempt-Exempt category, where deposits, interest earned, and the maturity amount are tax-free.
PPF: Maximum duration
One can invest for up to 15 years in a PPF account, but they can get extensions for further blocks of five years.
PPF: How to build over Rs 1 cr corpus?
Since you can invest a maximum of 1.50 lakh per financial year in your PPF account, you may utilise the full investment limit to become a crorepati.
If you invest Rs 1.50 lakh a year, your contribution during that period will be Rs 22,50,000.
The scheme provides compound interest, which will be Rs 18,18,209 in 15 years.
After the completion of your PPF scheme, your maturity amount will be Rs 40,68,209.
In that way, you will still be nearly Rs 60 lakh short of the Rs 1 crore corpus.
Here, you have to take a five-year extension and continue investing.
After the completion of the first five-year extension, your investment will grow to Rs 30,00,000.
You will receive the interest of Rs 36,58,288, and your maturity value will be Rs 66,58,288.
You are still about Rs 34.50 lakh short of the Rs 1 crore corpus.
At this juncture, you have to another extension of five years.
Your total investment will be for 30 years, in which you will invest Rs 37,50,000, the interest will be Rs 65,58,015, and the total corpus will be Rs 1,03,08,015.
It means that if you are consistent in your investment for 30 years, you can achieve crorepati status even in a risk-free, guaranteed return scheme such as PPF.
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