Investing in PPF
Public Provident Fund (PPF) is still counted among the most trusted schemes for long term investment. This scheme, guaranteed by the Central Government, is especially liked by employed people and people who like safe investments. There is no risk of market fluctuations and the benefit of tax free returns is also available.
According to financial experts, if a person starts regular investment in PPF from the age of 30, he can create a tax free fund of about Rs 1.54 crore by the time of retirement. For this, an investment of Rs 1.5 lakh will have to be made every year continuously for 30 years.
Big fund can be created by investing for 30 years
A maximum of Rs 1.5 lakh can be deposited in the PPF account during a financial year. If an investor invests this entire amount every year from the age of 30 and continues till the age of 60, then at an annual interest rate of 7.1 percent, a fund of about Rs 1.54 crore can be created.
The total investment during this period will be Rs 45 lakh, while the estimated interest can earn around Rs 1.09 crore. However, this calculation has been done on the basis of current interest rate of 7.1 percent and change in interest rates is possible in future.
There is a big benefit of compounding
Experts say that the biggest advantage of starting investment in PPF early is compounding. By keeping money deposited for a long time, interest continues to be earned, due to which even small amounts turn into big funds over time.
If a person starts investing at the age of 40 instead of 30, there will be less time for compounding and the retirement fund may be much smaller.
You can continue investing even after 15 years
The maturity period of PPF account is 15 years. However, investors can extend it further in a block of 5-5 years. That means a person can continue investing till his retirement age. Experts recommend that by depositing Rs 1.5 lakh in lump sum by April 5 of every financial year, you get interest benefits for the entire year.
You get big benefits in tax also
PPF gets EEE i.e. Exempt-Exempt-Exempt tax facility. This means that tax exemption is available on investment, the interest received remains tax free and the entire amount received on maturity is also tax free. For this reason, PPF is considered one of the safest and tax saving schemes for retirement planning.
