PPF for Regular Income: Should you close or extend your account after 15 years to get tax-free income of over Rs 75,000/month?
A public provident fund is popular for its lock-in period of 15 years and can also be extended in blocks of 5 years, and then for another 5 years, and so on, generally up to 31 years. Investors can extend their investment to maximise benefits. On that note, let's explore whether you should close or extend your PPF account to earn a tax-free income of over Rs 75,000/month
PPF for Regular Income: The Public Provident Fund is quite popular, and for good reason. It offers a triple tax exemption (Exempt-Exempt-Exempt or EEE) status, meaning the investment, returns, and maturity amount are all tax-free. It allows for partial withdrawals after a certain period and also permits loans against the investment. What's more, you can start investing in a PPF with a small amount of just Rs 500. Thus, find out whether you should close or extend your PPF account to earn a tax-free income of over Rs 75,000/month.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
Understanding PPF
Public Provident Fund is a retirement-centric scheme that investors also use for their portfolio diversification. It offers guaranteed returns and tax benefits under Section 80C of the Income Tax Act, 1961, to individuals. This small savings scheme is open to all individuals, including salaried and self-employed. A minor's PPF account can be opened by a parent or guardian.
What is maturity period of PPF account?
The maturity period is 15 years. After 15 years, the account holders can extend the account for unlimited blocks of 5 years each.
What is minimum and maximum PPF investment?
The minimum deposit in a financial year is 500, whereas the is Rs 1.5 lakh.
Tax benefits in 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.
Can you withdraw PPF amount before maturity period of 15 years?
A PPF subscriber is allowed to take 1 withdrawal during a financial year after 5 years, please note it does include the year of account opening. (if the account is open during 2025-26, the withdrawal can be taken during or after 2030-31).
How much can you withdraw at end of preceding year?
Investors 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 2025-26, up to 50% of the balance as of 31.03.2025 or 31.03.2025, whichever is lower).
What happens to PPF account after 15 years?
After 15 years of the maturity period, subscribers can continue their accounts with or without deposits.
Should you close or extend your account for tax-free income of over Rs 75,000/month?
You have to extend your account for a tax-free income of over Rs 75,000/month. Let’s find out how many years of extension you may opt to build this amount.
How to get over Rs 75,000 income a month from PPF?
To generate over Rs 75,000 a month from PPF one has to begin with 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 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 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 28 years?
In 28 years, the total investment will be Rs 42,00,000, the estimated interest will be Rs 89,80,178, and the estimated corpus will be Rs 1,31,80,178.
What is next step after 28 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 10,98,348, which will be equal to Rs 77,982 a month.