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PPF Investment: How much will be the income from investment and what income tax will have to be paid? If all these questions come to mind then Public Provident Fund (PPF) answers all your questions. Good returns on investment and tax saving option are available in the scheme. If you are planning for retirement or want to earn good income from investments in the long term, then you can choose this scheme. This scheme is also more popular by the name of PPF.
Why is PPF the best option?
Public Provident Fund (PPF) is most popular because the money deposited in it, the interest received and the amount received on maturity (PPF Maturity) are completely tax free. Meaning it has been kept in EEE category. EEE means exemption. There is an option to claim tax exemption on deposits every year. No tax has to be paid on the interest received every year. Once the account matures, the entire amount will remain tax free.
Who can invest in PPF?
Small Savings Scheme: Any citizen of the country can invest in PPF. It can be opened in post office or any bank. A minimum of Rs 500 and a maximum of Rs 1,50,000 can be invested every financial year. Interest is calculated on an annual basis. However, the interest is decided on quarterly basis. Currently 7.1 percent interest is being given on PPF. The maturity period lasts for 15 years. There is no facility to open joint account in the scheme. However, a nominee can be made. There is no option to open PPF account even in the name of HUF. In case of children, the name of the guardian is included in the PPF account. But, it remains valid only till the age of 18 years.
How will PPF make a millionaire?
PPF is a scheme in which it is easy to become a millionaire. This requires regular investment. Suppose you are 25 years old and you have started PPF. If you deposit Rs 1,50,000 (maximum limit) in the account between the 1st to the 5th of the financial year, Rs 10,650 will be credited only as interest at the beginning of the next financial year. Meaning, your balance on the first day of the next financial year will be Rs 1,60,650. If you do this again next year, the account balance will become Rs 3,10,650. Because, Rs 1,50,000 will have to be deposited again and then interest will be received on the entire amount. This time the interest amount will be Rs 22,056. Because, the compound interest formula works here. Now suppose that 15 years of PPF maturity have been completed, then you will have Rs 40,68,209 in your account. Of these, the total deposited amount will be Rs 22,50,000 and Rs 18,18,209 will be earned only from interest.
Investment will increase after maturity
PPF started at the age of 25. At the age of 40, an amount of more than Rs 40 lakh is in hand with maturity of 15 years. But if the planning is for long term then the money will increase rapidly. After maturity in PPF, the account can be extended for up to 5 years through extension. If the investor extends the PPF account for 5 years, then by the age of 45 the total amount will be Rs 66,58,288. The investment in this will be Rs 30,00,000 and the interest income will be Rs 36,58,288.
How long will it take to become a millionaire?
The goal of becoming a millionaire will now be accomplished. PPF account will have to be extended once again for the next 5 years i.e. up to 25 years. Then you will have to invest Rs 1,50,000 annually. At the age of 50, a total of Rs 1,03,08,014 will be deposited in the PPF account. The investment in this will reach Rs 37,50,000 and the interest will reach Rs 65,58,015.
Earning from interest alone will cross Rs 1 crore
The second feature of PPF is that you can extend it any number of times for 5 years. Now once again if the account is extended for 5 years then at the age of 55 you will have Rs 1 crore 54 lakh 50 thousand 910. The investment in this will be only Rs 45,00,000, but the interest income will be more than Rs 1. Crore and the total income will be Rs 1,09,50,911.
Will invest Rs 2 crore 26 lakh 97 thousand 857 for 35 years
If you have invested in it for retirement, then PPF will have to be increased once again for the last 5 years. Meaning overall the investment will continue for 35 years. In this case, maturity will be at the age of 60 years. In this case, the total amount deposited in the PPF account will be Rs 2 crore 26 lakh 97 thousand 857. The total investment in this will be Rs 52,50,000. Interest income will be Rs 1 crore 74 lakh 47 thousand 857.
If you want to double your money then invest like this
When you retire at the age of 60, there will be no tax on the huge amount of more than Rs 2 crore deposited in PPF. Generally, if you earn such a huge amount from somewhere else, you will have to pay heavy tax on it. If husband and wife together operate a PPF account for 35 years, then the total balance of both will be Rs 4 crore 53 lakh 95 thousand 714.
