Public Provident Fund
Creating a large fund for retirement is the dream of every working person. If you are looking for a safe and tax-free investment option, then PF and PPF can be a great tool for you. With regular investment and the power of compounding, you can create a fund worth crores of rupees in the long run. The special thing is that market risk is also very less in this. With proper planning, it is possible to create a retirement fund of more than Rs 1 crore in 25 years.
If a person starts investing at an early age and continues investing regularly every year, the power of compounding can make him a millionaire. At present 7.1 percent annual interest is being given in PPF. This interest is decided by the government and is reviewed every quarter. If an investor deposits a maximum of Rs 1.5 lakh in the PPF account every financial year and continues this investment for 25 years, then according to the current interest rate, his fund can reach around Rs 1.03 crore. Of this, approximately Rs 65 lakh will be the income from interest only. If the investor deposits the entire amount by April 5 every year, he gets interest benefits for the entire year. This is the reason why investing on time is considered very important.
PPF maturity
The maturity period of PPF is 15 years. However, after this the account can be extended in blocks of 5 years each. If the investor wishes, he can continue investing further or can avail the benefit of interest only on the deposited amount. The biggest thing is that both the amount and interest received on maturity are completely tax-free.
After retirement, this fund can also become a source of regular income. If 7.1 percent interest is earned on a fund of Rs 1.03 crore, then around Rs 7.3 lakh can be earned annually. This means that every month an income of about Rs 61 thousand can be earned only from interest. However, this income may increase or decrease due to changes in interest rates in future.
These people can invest
Financial experts say that PPF is the best option for those who want a safe investment. There is no risk of market fluctuations. Also one gets the benefit of EEE i.e. Exempt-Exempt-Exempt tax system. This means investment, interest and maturity all three remain tax-free. Some experts also believe that relying only on PPF for retirement planning would not be the right strategy. Inflation can reduce the real value of investments in the long run. Therefore, investors should also invest in equity, mutual funds and other asset classes.
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