PPF Calculator: How one can get Rs 61,000/month tax-free income from PPF at 50 years of age; know calculations
PPF Calculator: Investment in Public Provident Fund (PPF) not only provides debt exposure to your portfolio diversification, but it can also be used to get monthly income if used wisely.
PPF Calculator: In an era when market-linked investment options provide double-digit annualised return, investment in Public Provident Fund (PPF) may not appear to be appealing to new-age investors. But investment in PPF provides debt exposure to one's investment portfolio. The scheme provides 7.1 interest rate. It offers a tax-free retirement corpus, plus deposits up to Rs 1.50 lakh in a financial year provide tax benefits under Section 80C of the Income Tax Act, 1961. Know more about PPF and how one can draw Rs 61,000 per month tax-free income from PPF investment.
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(DIsclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)
PPF account
A PPF account can be opened in a post office or in a bank. All leading private and public sector banks provide the PPF account facility.
Anyone, including minors, can open a PPF account with a minimum deposit of Rs 500.
Maximum PPF investment
The maximum PPF investment allowed is Rs 1.50 lakh in a financial year.
PPF lock-in period
The lock-in period for a PPF account is 15 years. One needs to deposit at least Rs 500 in a financial year to keep their account active. Otherwise, it will become dormant, which the investor can revive after paying a penalty.
What happens to PPF account after 15 years
The account holder can withdraw the entire amount. Or, if they want, they can extend it for further unlimited blocks of 15 years.
At extension, the account holders can continue with or without deposits. In either case, they will get interest on their corpus.
PPF tax benefits
It is one of the few exempt-exempt-exempt category schemes where the amount invested up to Rs 1.50 lakh in a financial year, the interest earned, and the maturity amount are tax free.
How to generate Rs 60,000/month income from PPF
Rs 1.50 lakh/year investment for 15 years
In 15 years, the total investment will be Rs 22,50,000, the interest earned will be Rs 18,18,209, and the estimated corpus will be Rs 40,68,209.
Extend the account for 5 years and keep investing Rs 1.50 lakh
With that, the amount invested in 20 years will be Rs 30,00,000, the interest earned will be Rs 36,58,288, and the estimated corpus will be Rs 66,58,288.
Need to take another extension of 5 years and keep investing
If one takes another extension of 5 years and keeps investing Rs 1.50 lakh a year, their investment in 25 years will be Rs 37,50,000.
The interest earned will be Rs 65,58,015, and the estimated corpus will be Rs 1,03,08,015.
Stop PPF investment
From here, they need to stop investing more in PPF. As per the PPF rule, during the extension period, one can withdraw an amount from the PPF corpus once a year.
So, even if one withdraws just the interest amount at the end of every financial year, the estimated interest on Rs 1,03,08,015 will be Rs 7,31,869.06.
Rs 61,000 monthly income
If we divide it by 12, the estimated income in a month will come to Rs 60,989.
If one starts a PPF investment at 25 years of age and continue it for 25 years, at 50 years of age, they can get that income.