PPF for Regular Income: How can you get over Rs 1 lakh/month tax-free income from Public Provident Fund?
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. You can also make one withdrawal per financial year after completing 5 years from the account opening date. Therefore, let’s find out how you can get over Rs 1 lakh/month tax-free income from the Public Provident Fund.
PPF is a savings scheme that helps people save for retirement and diversify their investments. It is a long-term, low-risk investment scheme offered by the government in India. With a minimum tenure of 15 years, this scheme has a lock-in period that can be extended in 5-year blocks. PPF also benefits from tax exemptions. You can open a PPF account at a bank or post office. Now, let’s find out how to get over Rs 1 lakh/month tax-free income from the Public Provident Fund.
Photo source: Pixabay/Representational
DISCLAIMER: Not financial advice; invest at your own risk
Understanding Public Provident Fund
The Public Provident Fund (PPF) is a long-term, government-backed savings scheme in India designed to encourage consistent savings for the golden years. With a minimum tenure of 15 years, the interest rate is determined quarterly by the Government of India and is currently 7.1 per cent per annum.
Benefits of PPF
Guaranteed returns
Tax benefits under Section 80C of the Income Tax Act
Open to all individuals, including those who are employed or self-employed
Parents or guardians can open a PPF account for minors
What is maturity period of PPF account?
The maturity period of a Public Provident Fund (PPF) account is 15 years. After completing the initial 15-year term, account holders have the option to extend their PPF account for an unlimited number of 5-year blocks.
What are minimum and maximum deposit amounts in PPF?
The minimum deposit required in a year for a Public Provident Fund (PPF) account is Rs 500. On the other hand, the maximum investment limit in a year is Rs 1.5 lakh.
PPF tax benefits
Investing in a Public Provident Fund (PPF) account offers attractive tax benefits. Contributions up to Rs 1.5 lakh in a year are eligible for tax deductions under Section 80C. Plus, the interest earned on your investment and the corpus are completely tax-free.
Can you withdraw from PPF before maturity?
While the maturity period of a Public Provident Fund (PPF) account is 15 years, subscribers or account holders can make partial withdrawals before maturity. Here's what you need to know:
You can make one withdrawal per financial 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.
How much can you withdraw from PPF?
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.
What happens to your PPF account after 15 years?
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.
How to get over Rs 1 lakh income a month from PPF?
To generate over Rs 1 lakh a month from PPF, one has to begin with a Rs 1.50 lakh investment every year and continue it till the maturity period of 15 years. Later, you can extend the account for unlimited blocks of 5 years each for maximum return.
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 30 years?
In 30 years, the total investment will be Rs 45,00,000, the estimated interest amount will be Rs 1,09,50,911, and the estimated corpus will be Rs 1,54,50,911.
What will be PPF corpus after 35 years?
In 35 years, the total investment will be Rs 52,50,000, the estimated interest amount will be Rs 1,74,47,857, and the estimated maturity amount will be Rs 2,26,97,857.
What is next step after 35 years of investment?
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.
What will be your interest amount?
At a 7.1 per cent interest rate, the interest in a year will be Rs 18,91,488, which will be equal to Rs 1,34,295 a month.