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PPF as a Regular Income: Public Provident Fund, one of the popular small savings schemes of the post office, is also known as a retirement scheme. Due to the maturity of this scheme being 15 years, many employed people invest in it so that they can raise some funds for retirement. But very few people know that it can be used not only to create a big fund but also for pension income. If you read the rules of PPF carefully and invest according to those rules like a smart investor, then you can also use this government account for a good tax-free pension after retirement. Know how…..
PPF Extension Rules
The maturity period of Public Provident Fund is 15 years. But you can continue it for as long as you want in 5-5 year increments (PPF Extend Rules). That is, you can continue the scheme for 20 years or 25 years or 30 years or 35 years. After maturity, you can extend it for 5 years at a time by continuing the investment or without investing anything. If you continue this scheme after maturity without investing anything, then the funds present in the account will continue to get interest according to the current interest rate. If you invest, then this scheme will continue to give the same return as before maturity. Let us tell you that currently 7.1 percent interest is being given annually on this scheme.
Withdrawal rules on extension
Suppose you do not withdraw the money when the scheme matures and extend it for 5 years. In the first case, you extend after maturity without investing anything. In the second case, you continue investing as before during the extended period. In the first case, you can withdraw the entire amount once every year in the extended 5 years. While in the second case, you can withdraw up to 60 per cent of the money every year (PPF Withdrawal Rules).
Build a fund before retirement
Suppose you have started investing in a PPF account. If you start investing in this scheme even at the age of 35, then you will have the option to extend this scheme for 10 years even after the maturity of 15 years. That is, you can run this scheme for 25 years, when you will be 60 years old.
There is a rule to deposit a maximum of Rs 1.50 lakh in a financial year in PPF. If you deposit Rs 1.50 lakh every year in your account, then at the rate of 7.1 percent interest, there will be an amount of Rs 40,68,209 in each account on maturity of 15 years. Suppose you continue investing like this for 5 more years i.e. for the next 10 years, then after 25 years there will be Rs 1 crore in each account.
You will get tax free pension after retirement
Now the time for your retirement has come. In such a situation, you can extend the PPF account for another 5 years without investing. You will keep getting interest on the fund of Rs 1 crore present in your account. If the interest rate is assumed to be equal to the current rate i.e. 7.1 percent, then an interest of Rs 7,31,300 will be added to each account annually.
If we look at the withdrawal rules on extension, if you continue the account without investing anything, then you can withdraw the entire fund once every year in the extended 5 years. In such a situation, if you withdraw only the interest money, then you can withdraw Rs 7,31,300 every year, which will be around Rs 60,000 (Rs 60,917) on a monthly basis. At the same time, there will be no tax on this withdrawal.