Public Provident Fund (PPF) Investment: Equity investment is undoubtedly one of the popular ways to create wealth in the long run. However, market volatility concerns keep many aspiring small investors away from taking the plunge. For those looking for guaranteed returns in the long run, and save tax too, without having to bother about what may or may not happen in the market, there are some government-assured schemes promising healthy returns. If you are looking to build a corpus for retirement and also save income tax on the investment as well as the earned interest amount, Public Provident Fund (PPF) may be the right tool at your disposal right now. 

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Opening a PPF account is easy. It can be done in a few minutes through net banking facility offered by several commercial banks. Currently, the interest rate offered on PPF investment is 8 per cent and it is compounded annually. In the last decade, the average PPF interest rate, which is revised quarterly by the government, has remained around 8%. 

How much money you may grow with PPF

The maximum amount that can be invested in a PPF account in a financial year is Rs 1.5 lakh and the investment comes with a lock-in period of 15 years. This means you can make a full withdrawal only after 15-years. The account can be extended in blocks of 5 years each. Partial withdrawals are, however, allowed under specific conditions. 

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For best returns as far as accumulating a big lump sum for retirement is concerned, it is advisable to continue the PPF account beyond 15 years. Take a look at how much one may accumulate with the help of PPF while starting investment at an early age:

First, suppose you start investing Rs 1.5 lakh/year at the age of 30. 

Assuming that the current 8% interest rate remains valid over the years, your investment may grow over Rs 1.8 crore at the time of your retirement, that is at the age of 30. You can derive this number by using the humble compound interest formula taught in schools. In three decades, your total investment in the PPF account would be Rs 1,50,000 x 30 = Rs 45,00,000. This means, in the 30 years, your investment may grow four times (Rs 1.8crore/Rs 45 lakh) or by 400%. 

The most interesting aspect of PPF investment is that you won't have to pay any tax - either on the invested amount or the amount withdrawn on maturity. PPF falls in the 'EEE' category, implying PPF contribution, PPF interest amount and PPF maturity proceeds are exempt from income tax. 

Watch: Should investors invest in PPF after changes on interest rates?

PPF account can come handy here, coupled with assured returns for a worry-free retirement. By investing Rs 1.8 crore in schemes like LIC Jeevan Shanti, one may even get up to Rs 1.2 lakh/month pension for life.

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[Note: Online calculators have been used for the article. The article is for illustration purpose only.  Readers are advised to take guidance from authorised financial planners before making any investment.]