PPF For Regular Income: How you can get Rs 91,000 a month tax-free income from PPF investment; know here
PPF For Retirement Plannig: Public Provident Fund (PPF) is one of the popular investment schemes for retirement planning. An investor can make unlimited deposits in their PPF account with a maximum limit of Rs 1,50,000 in a financial year. The income generated from PPF is tax-free.
PPF for regular income, retirement corpus, retirement planning: Investors seeking to build a corpus for their retirement planning invest in market-linked and non-market-linked investment tools. It gives diversification to their portfolio as well as provides them with fixed returns and market-linked returns. Among non-market-linked investment options, Public Provident Fund (PPF) is one of the popular schemes where investors can generate tax-free income and a sizeable corpus in the long run. The investment in PPF also provides them tax benefits on deposits and withdrawals. Know more about the PPF scheme and how one can generate over Rs 91,000 tax-free income a month from it.
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(Disclaimer: This is not investment advice. Do your due diligence or consult an expert for financial planning.)
What is PPF?
Public Provident Fund (PPF) is a small savings scheme available at post offices and banks. Investors can open an account with a minimum contribution of Rs 500.
What is minimum and maximum PPF contribution?
The minimum contribution in a financial year is Rs 500, and the maximum is Rs 1,50,000. The account goes into the dormant stage of an account holder who fails to meet the minimum deposit obligation. They can revive it after depositing an amount. Investors can invest one time or make unlimited deposits in their PPF account.
What is PPF interest rate?
The interest rate of PPF is 7.1 per cent across post offices and banks. It remains the same for all institutions.
What are PPF tax benefits?
Investors following the old tax regime can take tax benefits of up to Rs 1.50 lakh on deposits in a financial year under Section 80C of the Income Tax Act, 1961. The scheme also belongs to the exempt-exempt-exempt category, where the interest earned and the maturity amount are also tax-free.
What is PPF maturity period?
The maturity period in PPF is 15 years. One completion of it, a PPF account holder can extend their PPF account for unlimited blocks of 5 years each.
What happens after PPF maturity period?
If one goes for a PPF account extension, they can deposit or may not do it at all. In either case, they will keep getting the interest amount.
How to get Rs 91,000 a monthly income from PPF?
Here, one needs to invest up to the full limit of PPF and keep investing it for a long term. Here's how their corpus will pan out at various stages of their investment. To get the maximum benefit of the PPF interest, they need to invest between April 1-5 every financial year.
PPF corpus after 15 years
The investment in 15 years will be Rs 22,50,000, the estimated interest will be Rs 18,18,209, and the estimated corpus will be Rs 40,68,209. After that, the investor needs to take an extension of 5 years.
PPF corpus after 20 years
The investment in 20 years will be Rs 30,00,000, the estimated interest will be Rs 36,58,288, and the estimated corpus will be Rs 66,58,288. After that, the investor needs to take another extension of 5 years.
PPF corpus after 25 years
The investment in 25 years will be Rs 37,50,000. The estimated interest will be Rs 65,58,015, and the estimated corpus will be Rs 1,03,08,015. At this stage, they need to take another extension of 5 years.
PPF corpus after 30 years
The investment in 30 years will be Rs 45,00,000, the estimated interest will be Rs 1,09,50,911, and the estimated corpus will be Rs 1,54,50,911. At this stage, they need to stop their investment.
What they need to do after that
As per PPF rules, during the extension period, an investor can withdraw an amount once a year. At this stage, they need to withdraw just the interest amount from their corpus.
What will be yearly withdrawal?
At a 7.1 per cent interest rate, the yearly interest amount on Rs 1,54,50,911 corpus will be Rs 10,97,014.681, which is equal to Rs 91,417.89 a month.
Benefit of long-term investment
A 30-year investment is a long time. But if one starts at 30, they can achieve the tax-free corpus by 60 and can withdraw a substantial amount to meet their expenses post retirement.