Public Provident Fund
For those who do not want to take the risk of stock market and want to earn big and government guaranteed money without any risk while remaining safe, then Public Provident Fund (PPF) is one of the most popular long-term saving options. PPF offers stable returns, tax-free interest and tax benefits on deposits under Section 80C of the Income Tax Act, 1961.
Although a maximum of Rs 1.5 lakh can be invested in a PPF account in a financial year, many investors want to know how much time it will take to build a corpus of Rs 1.54 crore through regular annual investments.
The answer depends on how much you invest every year and for how long you remain invested. Since PPF has the benefit of compounding, a large fund for retirement can be created even with a low annual investment.
ppf interest rate
The government currently gives an interest rate of 7.1 percent per annum on PPF deposits. Interest is calculated every month and deposited into the PPF account at the end of every financial year.
Can a fund of Rs 1.54 crore be created from PPF in 15 years?
- The maturity period of PPF is 15 years. However, an investor can take unlimited extension for five years while continuing the investment. Without investment, they can take an extension of five years.
- In our calculations we will see whether it is possible to accumulate Rs 1.54 crore by investing Rs 1.5 lakh every financial year.
- For calculation, we will also assume that the interest rate of PPF will remain 7.1 percent during the investment period.
- To avail the benefit of PPF interest rate, it is necessary to make a lump sum investment of Rs 1.5 lakh by 5th April every financial year.
- By depositing Rs 1.5 lakh in PPF every financial year, this amount becomes approximately Rs 40.68 lakh in 15 years. Here, the total interest works out to Rs 18,18,209 and the amount invested is Rs 22,50,000.
- If someone takes a five-year extension and keeps investing the same Rs 1.5 lakh every financial year, then he can accumulate a corpus of Rs 66.58 lakh in 20 years.
- This shows that it is not possible to accumulate a fund of Rs 1.54 crore even in 20 years, let alone 15 years. Then how many years can it take to deposit Rs 1.54 crore through PPF?
How to create a fund of Rs 1.54 crore from PPF?
If an investor starts investing the entire Rs 1.5 lakh every year from the age of 30 and does so continuously till the age of 60, then he can create a fund of Rs 1.54 crore. However, for this they will have to take three extensions of five years each, will have to deposit Rs 1.5 lakh by April 5 in every financial year and the interest rate should also remain at 7.1 percent.
