PPF for Regular Income: How you may get Rs 43,000 lifelong monthly income, over Rs 1,00,00,000 tax-free retirement corpus from PPF investment

PPF offers a 7.1 per cent interest rate compounded yearly. The PPF account can be opened in a post office or a bank. One can deposit a minimum of Rs 500 and a maximum of Rs 1.50 lakh in a financial year in their PPF account. 

If one deposits in PPF between April 1 and 5, they will get the maximum advantage of a 7.1 per cent interest rate on their PPF investment. The interest is credited on March 31 of every financial year. 

Since it provides compound interest, the investment grows faster with time. Let's see what corpus it can generate in 15 and 30 years on an yearly investment of Rs 1,50,000.

In 15 years, investment will be Rs 22,50,000, estimated capital gains will be Rs 18,18,209, and the estimated corpus will be Rs 40,68,209. In 30 years, investment will be Rs 45,00,000, estimated capital gains will be Rs 1,09,50,911, and the estimated corpus will be Rs 1,54,50,911.

Deposits up to Rs 1.50 lakh in a financial year (for old regime taxpayers), the interest earned, and the retirement corpus are tax-free in PPF.

One can avail a maximum loan of up to 25 per cent of the PPF balance. The maximum interest rate on this loan will be 6 per cent per annum.

PPF has a maturity period of 15 years. After 15 years, an account holder can either withdraw the amount, or they can extend the account for further blocks of 5 years with or without investment.

During the extension period, a PPF account holder can make 1 withdrawal in each financial year subject to a maximum limit of 60 per cent of the balance credit at the time of maturity in the block of 5 years.

Here, they need to invest Rs 1.50 lakh/year for 31 years. After that period they can withdraw 60 per cent of their corpus and let the remaining amount grow to withdraw Rs 43,000 monthly from the next financial year. Let's see how this maths will work.

In 31 years, the total investment in 31 years will be Rs 46,50,000, estimated interest will be Rs 1,20,58,575, and the estimated maturity will be Rs 1,67,08,575.

After 31 years, a 60 per cent withdrawal from a corpus of Rs 1,67,08,575 will be Rs 1,00,25,145. This amount will be tax-free. After this withdrawal, the remaining amount will be Rs 66,83,430. 

Since we have exhausted our withdrawal limit for the year, we can't withdraw for one financial year, but we will get a 7.1 per cent on the remaining corpus.

The interest earned on a Rs 66,83,430 retirement corpus will be Rs 4,74,523.53. So, the retirement corpus after a year will be Rs 71,57,954. This amount can be used to draw a monthly income.

Now from this stage, we will withdraw just the interest amount from the corpus. At a 7.1 per cent interest rate, it will be Rs 5,11,794. On a monthly basis, it will be Rs 42,649.