PPF is one of the most popular investment schemes to get guaranteed returns. Read on & learn how you can invest and get tax-free returns upto ₹1 Cr!
Only those investors who are dedicated and have the patience to hold investments for a very long time are aware of the magic of the Public Provident Fund (PPF) investment plan. PPF is a government-backed investment scheme that can help you in building up upto ₹1 crore in your account. But starting early with your savings and investing for the long term in a disciplined manner are the keys to getting a solid return on your Tax Free Maturity Investments.
PPF is an investment choice that provides long-term earning benefits. In order to provide domestic investors with a profitable investment option, the National Savings Organization introduced the PPF scheme in 1968. A PPF account has a 15-year maturity period after which you can either withdraw your whole balance or continue the account for additional periods of 5 years each.
PPF interest rates are more than 7% annually. Depending on the country’s current economic situation, the Indian government reviews the PPF interest rate every three months. You can deposit a minimum of ₹500 and a maximum of ₹1,50,000 annually into a PPF account, according to PPF rules. Deposits can only be made in a total of 12 transactions. So, if you open a PPF account and deposit the maximum amount permitted, you can eventually accumulate ₹1 crore.
Tax Free Maturity Investments: How Does PPF Magic Work
You can use PPF in one of these two methods to achieve your financial goals. For your reference, we have provided the following hypothetical calculation performed by a PPF Calculating Tool on how to accumulate ₹1 crore through PPF investing:
1st Method
The first option is to keep investing in PPF till your desired financial corpus grows. Let’s assume for the purposes of calculation that the existing PPF interest rate of 7.9% will not change throughout the course of the entire investment period.If you begin investing in PPF as soon as you begin to earn money, you can build up ₹1 crore by making an investment of ₹4,585 every month for 35 years. However, if you want to earn one crore sooner, you must increase your investment to ₹6,945 each month for 30 years at a 7.9% interest rate. If you wish to accumulate a corpus of ₹1 crore even before 30 years have passed, you must invest ₹10,720 every month for 25 years. The maximum amount you can put into a PPF each year is ₹1.5 lakh, thus you can only invest ₹12,500 per month. Therefore, if you choose to invest the maximum sum, or ₹12,500 every month, you can earn ₹1 crore in just 23 years. However, keep in mind that because the extension can only occur in a block of 5 years, you won’t be able to withdraw this money until 25 years.
2nd Method
The second choice is to maintain a fixed investment term of 15 years and leave your money in a PPF to grow and generate interest until it reaches your target of ₹1 crore. Assuming that the PPF interest rate stays at 7.9% for the whole of the investment period, if you invest ₹6,270 every month for 15 years in a PPF account, your money will increase to ₹21.87 lakh. You can cease making new investments after 15 years have passed and keep the entire corpus in the same PPF account for an additional 20 years. Your investment will reach ₹1 crore with interest yields. ₹1 crore can be earned in 30 years if the monthly investment amount is increased to ₹9,165. As demonstrated in the preceding example, you will invest for the first 15 years of these 30 years before being free from further obligation. Your total financial corpus with PPF will increase to ₹1 crore if you wait another 15 years.
Tax Free Maturity Investments: Why Is PPF So Popular?
As you can see, the PPF scheme is one of the most popular investment options even though it requires at least 23 years of consistent commitment to earn ₹1 crore. How?
Secure investment option: Well, security is one of the main factors. Because PPF is a government initiative, people have more faith in it. In addition, it is among the top investment choices for many prudent investors who like fixed-income investments. Due to the central government of India’s sovereign support, PPF investments are among the best and safest debt securities.
Income tax benefits: Furthermore, PPF is the sole choice that provides one of the highest returns among fixed income instruments. It is also among the best ways to reduce taxes. Under section 80C of the Income Tax Act of 1961, investors can claim up to ₹1.5 lakh from their taxable income. Additionally, interest earned on PPF investments is completely tax-free. PPF is the best debt investment option for investors in the highest income tax bracket since they receive a bigger tax-free refund.
Starts with a low amount: PPF is the best alternative for investors who are unable to save much money every month because you can start a PPF account online with just ₹100 each month. However, to keep the account open, be sure to invest ₹500 each fiscal year.
Flexible liquidity option: A PPF account offers a liquidity alternative even with its 15-year maturity period. You can borrow money against the balance of your PPF in times of financial crisis. To use this service, you must invest money for at least three years, though. After seven years, you can even partially take money from your PPF account if necessary. Open an account in the name of minors: You are permitted to open a PPF account in a minor’s name. However, keep in mind that you cannot hold a PPF account jointly; as a result, you must select one or more people and choose who will receive what portion of your PPF balance.
Conclusion
Now that you are fully aware of how PPF can help you to accumulate ₹1 crore in your account, it is time to begin investing. To plan your PPF investment strategy, use a reliable PPF Calculating Tool. Get in touch with us and our expert team at Vakilsearch will give you the best advice on your investment strategy.
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