PPF Interest Calculator: Is it possible to get Rs 60,000 income a month through Public Provident Fund? Know its possibility
Public Provident Fund: Investment in Public Provident Fund (PPF) creates a tax-free corpus. But even if we don't withdraw it, the corpus can be used to get regular income.
Public Provident Fund, Retirement Planning: Public Provident Fund (PPF) is one of the effective fixed return investment schemes to generate a retirement corpus. It has a lock-in period of 15 years. It inculcates investing habit in an investor since they can't withdraw an amount easily before the lock-in period for their unnecessary or unwanted expenses. PPF provides guaranteed return, so the investor's money is much safer than in market-linked investment options. The corpus generated through PPF is tax-free. If the investor doesn't withdraw their corpus after 15 years, they can use it to get regular income.
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(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial plannning.)
PPF: Minimum and maximum investment
The PPF account can be opened in a post office or a bank. In a post office, the minimum investment is Rs 500 in a financial year, while the maximum is Rs 1.50 lakh.
PPF: Interest rate in post office and banks
The interest rate remains the same for post office and banks. The current interest rate is 7.1 per cent per annum compounded yearly.
PPF: Lock-in period
The lock-in period is 15 years. But one can extend the account for further unlimited blocks of 5 years each.
PPF: Rules for extension
The PPF account holder can continue their account with or without investing. In either case, they will keep getting compound interest on the accumulated corpus.
Even if one is not contributing to PPF, they can withdraw interest once a year.
PPF: Tax benefits
Deposits up to Rs 1.50 lakh in a financial year provide tax benefits under Section 80C of the Income Tax Act, 1961. The interest earned and the maturity amount are also tax-free. It puts PPF under the exempt-exempt-exempt category.
How to earn Rs 60,000 a month from PPF
For that, one needs to invest Rs 1,50,000 in a financial year for 15 years. To get the maximum benefit of interest rate, one needs to invest from April 1-5 every financial year.
What will be corpus in 15 years?
Investment in 15 years will be Rs 22,50,000; the estimated interest earned will be Rs 18,18,209, and the estimated corpus will be Rs 40,68,209. The investor needs to extend this account to another 5 years and keep investing Rs 1.50 lakh in a financial year.
What will be corpus after 20 years?
Investment in 30 years will be Rs 30,00,000; the interest earned will be Rs 36,58,288, and the estimated maturity will be Rs 66,58,288. The investor needs to take an extension of 5 years and keep investing Rs 1.50 lakh in a financial year for another 5 years.
What will be corpus after 25 years?
The total 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 that point, they can stop their investment.
What they can do then
They can withdraw only the interest amount once a year. We are calculating as per the current interest rate of 7.1 per cent.
What will be interest from corpus?
At 7.1 per cent interest rate, the interest in a year on a Rs 1,03,08,015 corpus will be Rs 7,31,869. If we see it on a month basis, it will be Rs 60,989. There will be no income tax on this amount.
By what age, one can achieve this goal?
It depends on when they start. If one starts at 25 years of age, they can achieve the target of over Rs 60,000 income a month by 50 years of age.