Power of Rs 1,50,000 PPF Investment: How many years will it take to generate Rs 85,000/month tax-free income from Public Provident Fund?

As mentioned above, Public Provident Fund, which is popularly known as PPF, is a long-term, government-backed savings scheme in India. It is designed to encourage consistent savings for the golden years. The PPF scheme has a fixed tenure of 15 years, with the option to further extend it in blocks of 5 years. 

It offers guaranteed returns. Public Provident Fund is open to all individuals, including those who are employed or self-employed. Parents or guardians can open a PPF account for minors.

You can make one withdrawal per year after completing 5 years from the date of account opening. Note that the 5-year lock-in period includes the year of account opening. For example, if you opened your PPF account in 2024-25, you can make your first withdrawal in 2030-31 or later.

When making a withdrawal from your Public Provident Fund (PPF) account, there are specific limits to keep in mind:

You can withdraw up to 50 per cent of the balance at the end of the 4th preceding year or the end of the preceding year, whichever is lower. For example, if you are making a withdrawal in the financial year 2024-25, you can withdraw up to 50 per cent of the balance as of March 31, 2023, or March 31, 2024, whichever is lower.

After completing the initial 15-year maturity period, you have the flexibility to manage your Public Provident Fund (PPF) account as follows: You can choose to continue your account with or without making further deposits. This allows you to extend the benefits of your PPF account beyond the initial maturity period.

To generate Rs 85,000 per month from a PPF, you have to begin with an investment of Rs 1.50 lakh every year and continue it until the 15-year maturity period. Later, you can extend the account for blocks of 5 years each for maximum return. 

It will approximately take 29 years to reach this target corpus.

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.

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. 

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.

In 29 years, the total investment will be Rs 99,26,621, the estimated interest amount will be Rs 99,26,621, and the estimated corpus will be Rs 1,42,76,621. 

From here onwards, account holders can start withdrawing interest on the entire corpus. During extensions, the account holder is allowed to withdraw the interest amount once a year.  

At a 7.1 per cent interest rate, the interest in a year will be Rs 11,89,718, which will be equal to Rs 85,000 a month.