PPF Investment: After retirement, most people want to live a safe and self-reliant life. For this, Public Provident Fund (PPF) can be a very good option, let’s know about it…
PPF Investment: After retirement, most people want to live a safe and self-reliant life. For this, Public Provident Fund (PPF) can be a very good option. It is not only a means of saving tax but also a means of creating a good retirement fund in the long term. If you invest correctly, this scheme can also give regular pension-like income of up to Rs 60,000 every month, let’s know about it…
What is PPF?
Public Provident Fund (PPF) is a long term investment scheme backed by the government. This scheme gives safe returns away from market fluctuations. A maximum of Rs 1.5 lakh can be invested annually in this scheme. At present, it is getting 7.1% annual interest, which keeps increasing through compounding every year.
Do not withdraw money, let it remain in the account
When 25 years are completed, you should not withdraw all this money, but should let it remain in the account. Because if the money remains in PPF, you will keep getting interest on it every year. If you want, you can withdraw the interest amount only once a year, it can become your monthly income.
Remember, the mandatory lock-in period for a PPF account is 15 years. After the lock-in period is over, you have the option to either withdraw the entire amount or extend the investment period in blocks of 5 years. After 15 years, two extensions of 5 years each are allowed i.e. a PPF account can be run for a total period of 25 years.
How will a fund of Rs 1 crore be created?
Suppose you invest Rs 12,500 every month (ie Rs 1.5 lakh annually) in PPF for 25 consecutive years. In such a situation, your total deposit amount will be Rs 37,50,000. At an interest rate of 7.1%, you will get an interest of about Rs 65,58,015. That means you will have a total fund of Rs 1,03,08,015.
This way you will get a pension of more than Rs 60,000 every month
If you keep the entire Rs 1.03 crore in the account, then next year you will get an interest of Rs 7,31,869 on it. If you divide this interest over 12 months, you will get an amount of about Rs 60,989 every month – just like a regular pension. The best part is that your principal amount (Rs 1.03 crore) will remain safe in the account.
Smart way of retirement planning
If PPF is used with the right planning and discipline, then it can not only become a means of saving tax, but can also become a strong retirement fund. To extend PPF, it is necessary to renew it every 5 years. For this, you have to apply in the bank or post office and this work has to be done within one year of the account maturity. If you complete this process on time, then you can continue investing for 25 years without any interruption.
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