Looking to have a financially secured future? Well, one should start investing in Public Provident Fund (PPF) as soon as possible, say experts.
Public Provident Fund or PPF, introduced by the National Savings Organization in 1968, is a retirement planning-focused instrument. Periodic investment in PPF for a long-term can do the trick with the power of compounding.
Longer the money stays invested, the quicker it grows, experts say.
As per calculations, if someone starts investing Rs 5,000 per month today and continues the PPF account till 15 years, he is sure to earn over Rs 17 lakh at the time of maturity (in accordance with the current 7.1 percent rate of interest). Also, the same account can be extended within one year of maturity for further five years and so on to earn more benefits.
Let’s understand this calculation:
According to Groww, an investment platform, one can use this formula to compute the deposited amount, interest, etc. This formula has been given below:
F = P
Here F is the maturity of PPF (which is to be calculated). P stands for annual installments, while I stand for rate of interest. N is the total number of years.
Now assuming the above example it goes this way:
Nevertheless, calculating the interest rates and returns on the PPF account turns a bit difficult through this method. To make this easy, Groww has provided a PPF calculator.
Details that are to be provided to this PPF calculator includes tenure and total amount invested.
There is another benefit with PPF too. The account can remain active even after maturity, without making any fresh contributions. It continues earning tax-free interest after maturity, according to experts.
As per the Public Provident Fund Scheme 2019 rules, one can invest a minimum amount of Rs 500 and a maximum amount of Rs 1.5 lakh or Rs 12,500 per month in one financial year in PPF account.
PPF is also tax deductible up to the limit of Rs 1,50,000 under Section 80C of the Income Tax (I-T) Act.
According to Arpit Jain, vice president, Arihant Capital, the fixed rate of return brings in an element of predictability in the gains that one can expect when saving money in PPF.
First Published: IST