PPF for Regular Income: How to plan for over Rs 50,000 a month tax-free income from 100th Republic Day?
As India celebrates its 76th Republic Day, it is an apt time to learn about and plan your Public Provident Fund (PPF) investment wisely. Popularly known as PPF, the Public Provident Fund is a long-term savings scheme that enables investors to park surplus cash for at least 15 years for steady and guaranteed returns along with tax benefits. A PPF account allows investments ranging from Rs 500 to Rs 1.5 lakh per financial year with a minimum lock-in of 15 years allowing unlimited extensions of 5 years each.
Plan Your PPF Investment for Regular Income: Public Provident Fund (PPF) is quite popular among small savings schemes for a number of reasons. This is primarily because PPF, also known as “15-year PPF”, offers a dual benefit of guaranteed returns and tax benefits. Currently, PPF yields interest at 7.1 per cent with yearly compounding. One can invest in a PPF account for a minimum of 15 years and avail any number of 5-year extensions subsequently to avail tax benefits of up to Rs 1.5 lakh a financial year under Section 80C of the Income Tax Act and earn a tax-free amount on maturity.
As India celebrates its 76th Republic Day on January 26, 2025, it is an opportune time to learn about and plan your Public Provident Fund investment wisely. Have you ever wondered how to generate a substantial income from PPF? Is it possible to plan your investment to secure an income of Rs 6.73 per year (about Rs 56,060 per month) in 24 years using PPF? In this article, let’s explore a scenario where an individual can potentially make that happen by careful planning.
All images are representational. Image credit: PTI, Pexels
How does it work?
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PPF Investment
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Deposits into a PPF account must be made at least once every year for the first 15 years as well as during the extensions to be able to earn yearly income during the extended period.
Remember, after the initial lock-in pod of 15 years, the account can be extended any number of times in batches of 5 years.
PPF Tax Benefit
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How to plan to earn regular tax-free income from PPF
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First, complete the 15-year lock-in by investing Rs 1.5 lakh a year.
This way, at the end of the period, the maturity amount will be approximately Rs 40.68 lakh, including a principal of Rs 22.5 lakh and interest of Rs 18.18 lakh, calculations show.
Currently, PPF offers an interest rate of 7.1 per cent, compounded annually.
Now, let's plan your extensions
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How many extensions will you need to reach your goal?
First, let’s start with one extension of 5 years and see where your corpus reaches.
By continuing your yearly contribution of Rs 1.5 lakh, at the end of the first extension of 5 years, your maturity amount will be approximately Rs 66.58 lakh with a principal of Rs 30 lakh and interest of about Rs 36.58 lakh, calculations show.
Let’s see what happens at the end of another 5-year extension
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When can you start withdrawing the desired income?
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Let’s see how that works
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Can you start withdrawing at this stage?
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Now, how to get over Rs 50,000 income a month from PPF
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