Power of PPF: See what maximum investment can lead to in the long-term
Despite the surge in investments in the equity and mutual fund markets, the prospect of volatility and uncertainty unnerves crores of common people in India. They cannot think of putting their hard-earned money in uncertain instruments and will prefer security of capital over anything else
Kolkata: Security and safety of capital matter to such a large number of common people in this country that they cannot muster the courage to invest in the equity markets or any other instrument which are linked to the equity markets such as mutual funds. For this huge section of the population, fixed and guaranteed-return investments are the biggest attraction. Their returns might be far lower than equity and equity-linked instruments but the very fact that they assure about the safety of capital matters the most. Public Provident Fund, or PPF is one of the foremost instruments that Indians have depended on in this category for generations.
PPF was launched in 1968, when the nation was only 21 years into Independence and was under a controlled economy. PPF once paid a 12% rate of interest which has now shrunk to 7.1% with the introduction of the economic reforms. Though the rate of interest has climbed down, two other attractions of the PPF have remained intact -- the safety aspect and the fact that it offers full income tax benefits, being in the EEE (exempt-exempt-exempt) category.
How much will I get after 15 years in PPF
The initial lock-in period of PPF is 15 years. However, the tenure of the investment can be extended by multiples of 5 years. Therefore, one can easily stretch an investment by even 40 years or beyond. In the process, one can significantly amass a fortunes completely securely since PPF enjoys sovereign guarantee on the principal, interest and maturity amount. If one invests Rs 1.5 lakh every year, the maximum amount possible, in this instrument for 15 years, one can accumulate Rs 40,68,209.
How much will I get from PPF in 35 years
Consider a youth of 25 who begins earning at that age. He/she decides to invest Rs 1.5 lakh a year in the PPF account every year. He is diligent in his approach and steadily keeps it up without fail. If this person keeps it up till he/she reaches the age of 60, he/she will generate as much as Rs 1,54,50,911. or in excess of Rs 1.54 crore. However, the effective returns will actually be higher, since every year this individual will get an income tax benefit according to Section 80C of the Income Tax Act.