Public Provident Fund (PPF) scheme: Turn Rs 1.5 lakh/year into Rs 46 lakh, save income tax too!
Public Provident Fund (PPF): Want more than double of your investment and save income tax too on the earnings? You may laugh it out if a random person promises you. But not when you are aware of the government’s Public Provident Fund (PPF) scheme. If you are not aware, this is the best the time to acquaint yourself with the details of PPF. Introduced by the National Savings Organization in 1968 to mobilize small savings in 1968, the PPF currently offers 8% interest rate. It is one of the safest investment options with income tax benefits.
One can invest a minimum of Rs 500 and a maximum up to Rs 1.5 lakh/year in a PPFco account. The investment can be done either as a lumpsum at a time in a year, or for a maximum of 12 installments per year. The duration of PPF scheme is 15 years. On request of the subscriber, the account can be extended for 1 year or more blocks of 5 years each.
PPF calculator: Here is what you can expect to get as a return on your investment after the completion of the 15-year maturity period.
At the current rate of interest of 8% per year, you can get around Rs 46 lakh for an investment of Rs 1.5 lakh/year for 15 years. (Your total investment in the duration would be just 22.5 lakh).
Similarly, for an investment of Rs 100000/year, you can get around Rs 31 lakh on your total investment of Rs 15,00,000 in 15 years. By investing Rs 50,000/year, you can get around Rs 15 lakh (Your total investment would be just Rs 750,000). By investing a small amount of Rs 5000/month, you can get around Rs 18 lakh after 15 years.
All leading banks provide free PPF calculator, which you can access online to make an approximate calculation of the return on PPF investment. The PPF interest rate can change slightly over a period of time. The government determines the rate of interest on a quarterly basis.
Tax benefits: Under Section 88 of IT Act, income tax benefits apply for the investment and interest income from PPF account. The amount outstanding to the credit is fully exempted from Wealth Tax also. Moreover, the PPF comes with loan benefits depending upon the age of the account and balances as on the specified dates. Premature closure of PPF account is not allowed before 15 years.
Where to open PPF account?
You can open a PPF account with your bank as well as the Post Office. Check their websites for more details before investing.