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. 

ZeeBiz WebTeam | Jan 26, 2025, 03:33 PM IST

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 

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How does it work?

How does it work?

A PPF account has a lock-in period of 15 years, which can be followed by 5-year extensions.

During the extension period, if the investor chooses to continue contributing, they are allowed to make yearly withdrawals subject to certain conditions. 

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PPF Investment

PPF Investment

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. 

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PPF Tax Benefit

PPF Tax Benefit

Contributions to PPF are eligible for deduction in taxable income under tax laws (old regime), subject to the total limit of Rs 1.5 lakh a financial year under Section 80C of the Income Tax Act. 

Remember, the interest earned as well as the corpus are also tax-free in PPF.

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How to plan to earn regular tax-free income from PPF

How to plan to earn regular tax-free income from PPF

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. 

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Now, let's plan your extensions

Now, let's plan your extensions

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. 

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Let’s see what happens at the end of another 5-year extension

Let’s see what happens at the end of another 5-year extension

At the end of the 25-year period (the original lock-in of 15 years followed by 2 back-to-back extensions of 5 years each), your corpus will reach approximately Rs 1.03 crore with a principal of Rs 37.5 lakh and interest of Rs 65.38 lakh, calculations show. 

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When can you start withdrawing the desired income?

When can you start withdrawing the desired income?

By the end of 24 years, you will be able to reap the benefits of your investment the way you planned. 

 

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Let’s see how that works

Let’s see how that works

At the end of 24 years, your PPF maturity amount will have reached approximately Rs 94.75 lakh, with a principal of Rs 36 lakh and interest of about Rs 58.75 lakh, calculations show. 

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Can you start withdrawing at this stage?

Can you start withdrawing at this stage?

Yes, at this stage, you can start withdrawing the interest on the entire corpus once a year subject to certain conditions. 

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Now, how to get over Rs 50,000 income a month from PPF

Now, how to get over Rs 50,000 income a month from PPF

In 24 years, your total corpus will be about Rs 94.75 lakh, calculations show. 

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Now, how to get Rs 50,000 income a month from PPF

Now, how to get Rs 50,000 income a month from PPF

If you withdraw the interest annually starting at this stage, you will get Rs 6.73 lakh a year, which comes to about Rs 50,060 a month. 

This way, you can plan your PPF extensions wisely to earn the desired regular income. 

 

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