Banks and post offices themselves explain the benefits of investing in PPF. Good interest, tax free investment, the money received on maturity is completely yours. It is a great tool from investment point of view. Maturity period is 15 years.
Want to start investing or are looking for a way to earn good income from interest. Or want an investment where there is no risk. In such a situation, Public Provident Fund i.e. PPF scheme is the best. Any citizen of India can invest in it. The biggest thing is that the benefits available in it remain the most preferred. Banks and post offices themselves explain the benefits of investing in PPF. Good interest, tax free investment, the money received on maturity is completely yours. It is a great tool from investment point of view. Maturity period is 15 years. But, the investment can be extended even after 15 years. If you give extension, your returns will run at the speed of rocket and you will keep watching when the initial investment of Rs 5000 becomes more than Rs 26 lakh.
At the time of maturity you get 3 options. It is very important to understand these 3 options. First, withdraw your money after maturity. Secondly, even if you do not withdraw, interest will continue. Third, with new investment, extension can be given for 5 years. Let us understand how and what needs to be done.
1. Withdraw entire money on maturity
On maturity of PPF account, withdraw the amount deposited by you and interest. In case of account closure, the entire money will be transferred to your account. The money and interest received on maturity will be completely tax free. Apart from this, income tax exemption is available on investments up to Rs 1.5 lakh every year. You will not have to pay any tax on whatever money you have deposited during the entire tenure.
2. Increase PPF investment for 5 years
The second option is to increase the investment after maturity. In the scheme, the option of account extension is given for a tenure of 5-5 years. However, if you want extension for the next 5 years, then you will have to inform the bank or post office 1 year before the maturity of the PPF account. The good thing is that the rule of pre-mature withdrawal does not apply at the time of extension and you can withdraw money anytime.
3. Scheme without increasing investment even after maturity
Third option in PPF account, even if you do not choose the above two options, the account will continue to operate after maturity. There will be no need for new investment in this. Maturity will automatically extend by 5 years. But, the biggest advantage will be that you will continue to get interest on the deposited amount during this entire period. After this, after completion of 5 years, it can be extended again in the same manner.
Where can you open PPF account?
PPF account can be opened in any government or private bank. Apart from this, you can also open an account in any post office branch of your city. There is also an option to open an account for a minor. However, the parents’ holding on behalf of the minor remains for 18 years. According to Finance Ministry rules, a Hindu Undivided Family (HUF) cannot open a PPF account.
How will Rs 5000 become Rs 26.23 lakh?
Currently 7.1% interest is being given in Public Provident Fund. Interest is calculated annually. But, it is decided on quarterly basis. There has been no change in its interest rates for quite some time. Let us assume that if you invest at the same interest rate for 15 or 20 years, a huge corpus will be created at different amounts. You can see the calculations below.
| Monthly Investment | You will get this much money in 15 years (Rs) | You will get this much money in 20 years (Rs) | You will get this much money in 25 years (Rs) |
|---|---|---|---|
| 1000 | 3.18 | 5.24 | 8.17 |
| 2000 | 6.37 | 10.49 | 16.35 |
| 3000 | 9.55 | 15.73 | 24.52 |
| 5000 | 15.92 | 26.23 | 44.88 |
| 10,000 | 31.85 | 52.45 | 81.76 |
| 12,500 | 39.82 | 65.57 | ₹1.02 crore |
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