PPF Investment: PPF is a government savings scheme that started in 1968. It was created for those who want to avoid risk and want to get fixed returns.
PPF Investment: Retirement planning is important for every person. It is very important to choose the right investment plan so that life can go on comfortably even after leaving the job. There are many investment options available in India, but Public Provident Fund (PPF) is one of the most popular savings schemes among the people. It is a great way to save for retirement as it offers compound interest benefits and returns are tax-free. Currently, the interest rate of PPF is 7.1% per annum. But can you create a big fund of Rs 1 crore by investing in PPF? Let’s understand this in simple language through calculation.
Public Provident Fund (PPF)
PPF is a government savings scheme that started in 1968. It was created for those who want to avoid risk and want to get fixed returns. In this, you can invest a minimum of Rs 500 and a maximum of Rs 1.5 lakh every year. Its lock-in period is 15 years, and the interest rate is decided by the government every quarter. Currently (April-June 2025) the interest rate of PPF is 7.1% per annum. It is completely safe because it is supported by the government.
What is the minimum and maximum investment in PPF?
In PPF, you can start with a minimum of Rs 500 and invest a maximum of Rs 1,50,000 in a financial year. You can deposit this money in one go or in a maximum of 12 installments in a year. For example, by depositing Rs 12,500 every month, you can meet the annual limit.
A big advantage of PPF is its tax benefit. The money deposited in it gets a rebate of up to Rs 1,50,000 under Section 80C of the Income Tax Act. Also, the interest received is also income tax free. There is also a loan facility in PPF, which is available after continuous investment for 3 years. Apart from this, you can withdraw some money from the 7th financial year. PPF account matures after 15 full financial years. After this, if you wish, you can extend it in blocks of 5-5 years.
How does the calculation of PPF work?
If you invest Rs 1,50,000 every year, then in 15 years, when the account matures, your fund can reach Rs 40.68 lakh. If you do not close it and continue investing for the next 10 years, i.e. in two blocks of 5-5 years, then this fund can become Rs 1 crore.
In a period of 25 years, you deposit a total of Rs 37.50 lakh and earn Rs 65.58 lakh from interest. At the end of the investment period, your total fund will be Rs 1.03 crore.
To extend the account, PPF account holders have to submit Form-4 within 1 year of maturity. This form has to be submitted at the post office or bank.
Understand with an example:
15 year calculation:
- Annual investment: Rs 1,50,000
- Total investment: 1,50,000 × 15 = Rs 22,50,000
- Interest rate: 7.1%
- Total amount: Rs 40,68,000 (approx.)
25 year calculation:
- Total investment: 1,50,000 × 25 = Rs 37,50,000
- Interest: Rs 65,58,000
- Total fund: ₹1,03,08,000 approx (1.03 crore)
- So, to achieve the target of 1 crore you have to invest for 25 years.
How is interest calculated in PPF?
Interest in PPF is calculated on the lowest balance of every month. This balance is seen from the 5th to the last date of the month. If you deposit money before the 5th, you get the full interest for that month. Interest is added to your account at the end of the year, on March 31.
Example: If you have Rs 20,000 in your account on April 1 and you deposit Rs 10,000 on April 4, then the balance on April 5 will be Rs 30,000. Interest will be received on this. But if you deposit on April 6, then interest will be received only on Rs 20,000.
When can a PPF account be closed prematurely?
It is not easy to withdraw PPF money before 15 years, but it can be closed due to certain reasons. If the account holder is caught in a problem like a serious illness, his spouse, children or parents are suffering from any life-threatening disease, then money can be withdrawn for treatment.
Apart from this, if the account holder needs money for his studies, then withdrawal can be done. For this, admission papers in a recognized institute will have to be shown. Also, if you are leaving the country and going abroad, you can close the account. However, the account cannot be closed under any circumstances before 5 years of opening.
Advantages and disadvantages of PPF
The best thing about PPF is that it is guaranteed by the government, which means that there is no risk in it. Also, it has the facility of tax-free interest. Apart from this, the facility of loan and withdrawal in difficult situations is given.
If we talk about its disadvantages, then the biggest difficulty is the long lock-in period of 15 years. Apart from this, the maximum limit of annual investment in it is also up to Rs 1,50,000. Also, the return here is less than other investment options available in the market.
So what to do?
If you want safe and tax-free returns, then PPF is right for you. By investing Rs 1,50,000 every year for 25 years, you can make Rs 1.03 crore. But if you want quick money or expect higher returns, you may have to look at other schemes, like NPS or mutual funds.
Suppose you start PPF at the age of 30. At the age of 45, 15 years will be completed and you will have Rs 40.68 lakh. If you extend it to 55 years (25 years), you will get Rs 1.03 crore. This can be a good fund for retirement. Understand your needs and goals before starting to invest in PPF. Put money before the 5th of every month, so that you get the full benefit of interest. Start planning today to make your retirement dream come true!
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