Public Provident Fund: How to get Rs 1 crore with PPF

Consultant picture

Public Provident Fund (PPF) is taken into account a very good funding choice. Not simply earnings tax advantages, the curiosity earned in addition to remaining maturity quantity on PPF deposits are tax free. Nonetheless, not all buyers are conscious of how curiosity is calculated on PPF funding. Over an extended time frame, an investor can accumulate Rs 1 crore and much more by PPF. However to build up this a lot quantity you will need to know when is the most effective time to take a position, whether or not lump sum funding or month-to-month funding is extra helpful, and the way the curiosity can be calculated in your deposits.

Since final yr, the federal government has stored the PPF rate of interest unchanged at 7.1%. On March 30, 2020, the federal government had introduced a steep lower within the rates of interest on small financial savings schemes together with PPF.

The curiosity on PPF steadiness is calculated on a month-to-month foundation. Nonetheless, it’s credited to the account of the subscriber solely on the finish of the monetary yr (March 31).

PPF calculation

For calculation function, the minimal steadiness within the PPF account between the fifth and the tip of every month is taken into account. This implies, if a subscriber invests after the fifth day of a month, then he’ll get curiosity on the earlier month’s steadiness. Nonetheless, should you make investments earlier than the fifth day of a month, you’ll get curiosity curiosity on the present month’s steadiness additionally, together with the earlier month’s steadiness.

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If you wish to attain your aim of Rs 1 crore by PPF quick, you need to take into account depositing cash within the account earlier than fifth day of a month.

Now, allow us to take a look at how a lot you must make investments each month to build up Rs 1 crore with PPF.

On the present 7.1% curiosity, your PPF account could have a corpus of round Rs 40 lakh after 15 years should you make investments Rs 1.5 lakh per yr (or Rs 12,500 per 30 days in PPF account.) That is whereas assuming that the rate of interest stays unchanged for 15 years. It is very important word right here that PPF rate of interest is revised by the federal government on a quarterly foundation. Therefore, the PPF rate of interest might go up or down by the funding interval.

Word: One can make investments a most of Rs 1.5 lakh and minimal Rs 500 in PPF account in a yr.

In line with the Public Provident Fund Scheme 2019 guidelines, you may lengthen the PPF account in a block of 5 years. To get Rs 1 crore, you’ll have to hold extending your account. So, should you lengthen your account for 5 years after maturity interval of 15 years, your corpus can be round Rs 66 lakh on the finish of 20 years (assuming 7.1% curiosity). When you lengthen your account for one more 5 years, you’ll get round Rs 1 crore after 25 years.