Public Provident Fund (PPF): Do you want to start investing or are looking for a way to earn good income from interest. Or, you are seeking an investment option which is not market-linked and offers you guaranteed returns and fixed income. In such a situation, Public Provident Fund i.e. PPF, is one of the best options. Any citizen of India can invest in PPF and open their account in a post office or a bank.
While PPF offers a good interest rate, it is a tax free investment, which means that the money you receive on maturity is completely yours.
The maturity period is 15 years, but you can extend your investment even after 15 years.
If you give extension, your returns will run at a brisk speed.
You will see that soon your investment of Rs 5,000 a month, will become more than Rs 26 lakh.
At the time of maturity you get 3 options.
First, withdraw your money after maturity. Secondly, even if you do not withdraw, interest will continue. Third, with new investment, extension can be given for 5 years.
Let us understand how and what needs to be done here.
PPF: Withdraw entire money on maturity
On maturity of PPF account, withdraw the amount deposited by you and interest.
In case of account closure, the entire money will be transferred to your account.
The money and interest received on maturity will be completely tax free.
Apart from this, income tax exemption is available on investments up to Rs 1.5 lakh every year.
You will not have to pay any tax on whatever money you have deposited during the entire tenure.
PPF: Increase PPF investment for 5 years
The second option is to increase the investment after maturity.
In this scheme, the option of account extension is given for a tenure of 5-5 years.
However, if you want extension for the next 5 years, you will have to inform the bank or post office one year before the maturity of the PPF account.
The good thing is that the rule of pre-mature withdrawal does not apply at the time of extension and you can withdraw money anytime.
PPF: Scheme without increasing investment even after maturity
Even if you do not choose the above two options, the PPF account will continue to operate after maturity.
There will be no need for new investment in this.
Maturity will automatically extend by 5 years.
But, the biggest advantage will be that you will continue to get interest on the deposited amount during this entire period.
After this, after completion of 5 years, it can be extended again in the same manner.
PPF: Where can you open PPF account?
PPF account can be opened in any government or a private bank.
Apart from this, you can also open an account in any post office branch of your city.
There is also an option to open an account for a minor.
However, the parents’ holding on behalf of the minor remains for 18 years.
According to the Finance Ministry rules, a Hindu Undivided Family (HUF) cannot open a PPF account.
PPF: How will Rs 5000 become Rs 26.63 lakh?
Currently 7.1 per cent interest is being given in Public Provident Fund (PPF).
Interest is calculated annually. But, it is decided on quarterly basis.
There has been no change in its interest rates for quite some time.
Let us assume that if you invest at the same interest rate for 15 or 20 years, a huge corpus will be created at different amounts.
You can see the calculations below.
If you invest Rs 5,000 a month, or Rs 60,000 a year, your total investment in 15 years will be Rs 9 lakh, you will get an interest of Rs 7.27 lakh, and your maturity amount will be Rs 16.27 lakh.
However, if you extend your investment to the next five years, i.e a total of 20 years, your total investment will be Rs 12 lakh, you will get an interest of Rs 14.63 lakh and your maturity amount will be Rs 26.63 lakh.
