PPF Scheme: Deposit Rs 5000 Monthly to Accumulate 42 Lakhs – Full Calculation
PPF Scheme
The Public Provident Fund (PPF) scheme has long been regarded as a secure and lucrative avenue for long-term investment in India. If you’re already invested in the PPF scheme or considering it, here’s some exciting news for you.
The PPF scheme offers the potential to amass a fund exceeding Rs 1 crore over time. With the government’s backing, your money remains secure, and you can expect substantial returns.
The best part? You won’t need to pay taxes on the returns you receive.
In this comprehensive guide, we will delve into the PPF scheme, exploring why it is considered one of the best options for long-term investment, how you can accumulate substantial wealth through it, and the various aspects of opening and managing a PPF account.
Why PPF is Your Ideal Long-Term Investment
The PPF scheme is a top choice for long-term investment, allowing you to invest up to Rs 1.5 lakh annually.
With the benefit of compound interest, your investment grows steadily, and market fluctuations have no impact on these government-backed schemes. Let’s delve deeper into the reasons why PPF is an ideal choice for long-term investors.
1. Safety and Government Guarantee
One of the primary reasons investors flock to the PPF scheme is the safety and government guarantee associated with it.
The Indian government introduced the PPF scheme with the aim of providing a secure avenue for citizens to accumulate wealth over time. Your investments in the PPF are protected by the government, making it a risk-free option.
2. Tax Benefits
Tax considerations play a crucial role in the attractiveness of the PPF scheme. Contributions made towards a PPF account are eligible for tax deductions under Section 80C of the Income Tax Act.
As of the knowledge cutoff date in September 2021, the maximum limit for this deduction was Rs 1.5 lakh.
Furthermore, the returns you receive upon maturity are entirely tax-free, providing a significant advantage over other investment options.
3. Compound Interest
The PPF scheme offers compound interest, which is calculated on the total balance in your account at the end of the financial year.
This means that not only do you earn interest on your initial investment, but you also earn interest on the interest that has already been credited to your account.
Over the long term, this compounding effect can significantly boost your wealth.
4. Long-Term Investment Horizon
The PPF scheme is designed for individuals with a long-term investment horizon. While the minimum lock-in period is 15 years, you have the option to extend your investment in blocks of 5 years after the initial maturity period.
This makes it an attractive option for individuals looking to build wealth for retirement or other long-term financial goals.
How to Reach Rs 42 Lakhs
Let’s break down how you can accumulate Rs 42 lakh through the PPF scheme. Suppose you invest Rs 5,000 every month.
In a year, your total investment amounts to Rs 60,000. Over 15 years, your maturity amount would be Rs 16,27,284.
If you continue depositing for additional 5-year increments, after 25 years, your fund will reach around Rs 42 lakh (Rs 41,57,566). Your initial contribution will be Rs 15,12,500, and your interest income will be Rs 26,45,066.
Similarly, if you increase your monthly deposit to Rs 12,500, you can achieve a corpus of Rs 1 crore after 25 years.
Here’s a detailed table showcasing how different monthly investments can grow over time:
| Monthly Investment (Rs) | After 15 Years (Rs) | After 20 Years (Rs) | After 25 Years (Rs) |
|---|---|---|---|
| 1000 | 3.18 | 5.24 | 8.17 |
| 2000 | 6.37 | 10.49 | 16.35 |
| 3000 | 9.55 | 15.73 | 24.52 |
| 5000 | 15.92 | 26.23 | 44.88 |
| 10,000 | 31.85 | 52.45 | 81.76 |
| 12,500 | 39.82 | 65.57 | 1.02 crore |
This table represents the growth of investments in terms of returns over different time periods based on various monthly contribution amounts.
This table illustrates the power of regular investments and compounding interest. Even with a modest monthly investment of Rs 5,000, you can accumulate a substantial corpus over time.
Opening a PPF Account
Now that we’ve explored why the PPF scheme is an excellent choice for long-term investment let’s delve into the practical aspects of opening and managing a PPF account.
1. Minimum Investment Requirement
You can start investing in the Public Provident Fund Scheme with a minimum investment of Rs 500. This low entry barrier makes it accessible to a wide range of individuals, from students to working professionals and retirees.
2. Where to Open a PPF Account
Opening a PPF account is convenient, as you can do it from your nearest post office or an authorized bank. This accessibility ensures that you can initiate your PPF journey without any hassle.
3. Interest Rate and Maturity Period
As of January 1, 2023, the government provides an interest rate of 7.1 percent on PPF accounts.
Additionally, the maturity period of a PPF account is set at 15 years. This lock-in period ensures that your money remains invested for the long term, helping you achieve your financial goals.
4. Flexible Contribution
The PPF scheme offers flexibility in terms of contributions. You can deposit any amount between the minimum and maximum limits. While the minimum yearly deposit is Rs 500, you can invest up
