look news india
In the uncertain times of the stock market and the ups and downs of mutual funds, every common investor is looking for an option where his hard-earned money remains completely safe and the returns on it are also certain. The Public Provident Fund (PPF) operated by the Indian Post Office and authorized banks remains the strongest pillar of financial security for the middle class, self-employed and employed people of the country. Being equipped with the Sovereign Guarantee of the Central Government, there is no risk of loss of even a single rupee. If an investor resolves to save his daily tea-snacks or small expenses and deposit regular savings of just ₹2,500 in his PPF account every month, then this small habit can create a tax-free corpus of lakhs of rupees in the next 15 years.
Presently the Government of India on Public Provident Fund 7.1% per annum compound interest (Annual Compounding) being given. The basic maturity period of this scheme is 15 financial years. If you deposit ₹2,500 every month, your total investment in a year comes to ₹30,000.
The financial breakup of this investment over the entire period of 15 years is as follows:
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Monthly Savings: ₹2,500
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Annual Investment: ₹30,000
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Your total accumulated capital (principal) in 15 years: ₹4,50,000 (four lakh fifty thousand rupees)
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Total interest earned in 15 years at the rate of 7.1%: ₹3,64,380 (Rupees three lakh sixty-four thousand three hundred and eighty)
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Total maturity amount after 15 years: ₹8,14,380 (Approximately ₹8.14 lakh)
If seen in this manner, then on the ₹ 4.50 lakh deposited by you, you get about ₹ 3.64 lakh only as interest from the government. That means, without taking any business risk, a net profit of more than 80 percent on your original deposit comes directly into your hands.
The biggest feature of PPF is its ‘Exempt-Exempt-Exempt’ (EEE – Exempt, Exempt, Exempt) tax status, which puts it miles ahead of bank FDs and other savings schemes:
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First E (Rebate on Deposit): Under Section 80C of the Income Tax Act, there is direct benefit of tax deduction on investments up to ₹ 1.5 lakh per financial year.
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Second E (Discount on Interest): The compound interest added to your account at the end of every financial year is completely tax-free. No TDS is deducted on this like bank FD.
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Third E (Discount on Withdrawal): When you withdraw the entire fund (principal + interest) after 15 years, the government does not charge even a single rupee capital gain or income tax on that total amount of ₹8.14 lakh. This entire amount constitutes 100% of your net income.
To earn maximum interest in PPF account, it is important to understand a very technical and important rule. As per the rules, monthly interest on PPF account is calculated every month. From the end of the 5th to the last day of the month It is done on the minimum balance between.
If you deposit your monthly installment of ₹2,500 between the 1st and 5th of every month, the bank or post office adds interest at the rate of 7.1% on that new amount for the entire month. But if you deposit money after the 5th, i.e. on or after the 6th, then interest on that deposit does not accrue for the entire month and that interest starts accruing directly from the next month. Therefore, always set the mandate of auto-debit in your bank account only between 1st to 4th of the month so that you do not have to suffer the loss of even a single day of interest.
The biggest strength of Public Provident Fund is its flexibility. After completion of 15 years, if you do not have immediate need of money at that time, you can extend your account in a block of 5 years. This is where the real power of compounding, called the ‘eighth wonder of the world’ by Albert Einstein, is visible.
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On continuing for 20 years: If you continue to invest ₹2,500 per month after 15 years by extending the account for 5 more years for a total of 20 years, your total investment will be ₹6,00,000 and your maturity fund will grow to approximately ₹13.62 lakh will reach.
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On continuing for 25 years: If you stretch it out for a total period of 25 years, your total accumulated money will be ₹7,50,000, while at the speed of compound interest, your total fund will grow directly. ₹21.90 lakh Will cross the figure of Rs.
That means a modest monthly savings of just ₹2,500 can later create a huge financial base of ₹22 lakh for your retirement or children’s higher education.
PPF account is always ready to help you in times of emergency financial needs. From the third financial year to the sixth financial year of account opening, you can avail a personal loan against the account balance at very affordable interest rates, without the need to pledge any property. Additionally, from the beginning of the seventh financial year, the account holder is legally permitted to make partial withdrawals for children’s marriage, higher education or treatment of serious illnesses. This account can be opened in a few minutes by visiting any nationalized bank, private bank or nearest post office with just Aadhar card, PAN card and a passport size photograph, or it can also be activated online directly from home through the mobile app of the concerned bank.