PPF For Regular Income: How you can get Rs 78,000 a month tax-free income through Public Provident Fund investment?
PPF For Retirement Planning: Public Provident Fund is a retirement-focussed scheme where the account holder can invest a lump sum amount or in phases to create a retirement corpus. Long-term investors can generate income just from the PPF interest earned from their fund.
PPF For Retirement Planning: Investors seeking a sizeable retirement corpus invest in market-linked or non-market-linked investment schemes. For the diversification of their portfolio, it is necessary to have a mix of fixed income as well as market-linked investments. Public Provident Fund (PPF) is a fixed interest rate investment scheme where an investor can invest up to Rs 1.50 lakh in a financial year. With continuous investment, a PPF corpus can help an investor get an estimated tax-free income of Rs 78,000 a month.
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(Disclaimer: This is not investment advice. Do your due diligence or consult an expert for financial planning.)
What is PPF?
PPF is a popular small savings, retirement-focussed investment scheme where investors can open an account in a post office or a bank.
Which offers higher PPF interest rate?
Post offices and banks offer the same PPF interest rate at 7.1 per cent compounded quarterly. The interest is credited to the account at the end of each financial year. To get the maximum benefit from the interest rate, a PPF account holder should deposit the lump sum amount from April 1-5 every financial year.
What is the minimum contribution in PPF?
A PPF account can be opened with a minimum deposit of Rs 500. The same amount a financial year is required to maintain the account. The maximum deposit limit in a financial year is Rs 1.50 lakh. It can be deposited as a lump sum or in unlimited instalments.
Does PPF has some maturity period?
The maturity period for the PPF account is 15 years. After that, the account holder can extend the account for unlimited blocks of 5 years each.
Is it necessary to deposit amount during extensions?
It is not mandatory to invest during PPF account extensions. But if one wants, they can invest up to Rs 1.50 lakh in a financial year.In either case, they will get interest income.
What are PPF's tax benefits?
Investors on deposits up to Rs 1.50 lakh a financial year can get tax benefits under Section 80C of the Income Tax Act, 1961.
The interest earned and the maturity amount are also tax-free.
How to get Rs 78,000 a month from PPF?
For that one needs to exhaust the deposit limit of PPF. They need to invest Rs 1.50 lakh lump sum in the beginning of each financial year. To get the maximum benefit of the PPF investment, they need to deposit it between April 1-5 every financial year. But for how many years? See calculations to know that!
PPF corpus in 15 years
First of all, an investor has to deposit Rs 1.50 lakh in a financial year for 15 years.
In 15 years, the total investment 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. From there, the PPF investor needs to take 3 extensions.
PPF corpus in 20 years
In 20 years, the total investment will be Rs 30,00,000, the estimated interest will be Rs 36,58,288, and the estimated maturity will be Rs 66,58,288.
PPF corpus in 25 years
In 25 years, the total investment 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. The investor needs to take another 5-year extension and keep investing for 3 more years.
PPF corpus in 28 years
The total investment in 28 years will be Rs 42,00,000, the estimated interest will be Rs 89,80,178, and the estimated corpus will be Rs 1,31,80,178.
How to get Rs 78,000 a month
As per PPF extension rules, an investor can withdraw the interest amount once a year. Here the investor just needs to withdraw the interest generated.
How to get Rs 78,000 a month
At a 7.1 per cent interest rate, a Rs 1,31,80,178 retirement corpus can generate an estimated interest amount of Rs 9,35,792.638. On a monthly basis, it will be equal to an estimated Rs 77,983.