How to 3x Your Savings Just INR 5,000 Per Month in PPF?

Public Provident Fund (PPF) is a widely known scheme when it comes to saving and a long term investment option as well as who would like to earn a high level but a stable amount of returns.

Individuals who have a low-risk appetite and want to safeguard their principal amount prefer opening a PPF account. Funds invested in this account aren’t marked linked and since this is made compulsory by the government, the returns are guaranteed to protect the financial needs of masses of people in India.

Public Provident Fund (PPF)

If someone today starts to invest Rs 5,000 per month and continues the PPF account till 15 years, he/she is for sure going to earn over 3x of your savings at the time of maturity. The same account can be extended within one year of maturity for a further five years and so on to earn more benefits.

What are the features of a PPF Account?

The important features of a public provident fund scheme are highlighted as follows:

Loan against investment

Public provident funds give one the benefit of availing loans against the investment amount. Keep in mind that the loan will only be granted if it is taken at any time from the beginning of 3rd year till the end of the 6th year from the date of activation of the account. The maximum tenure of loans taken against PPF is 36 months. Only 25% or less of the total amount available in the account can be claimed for this purpose.

Principal amount

A minimum of Rs. 500 and a maximum of Rs. 1.5 Lakh can be invested in a provident fund scheme on an annual basis. This investment can be undertaken in a lump sum or installment basis. However, an individual is eligible for only 12 yearly installment payments into a PPF account. Investment in a PPF account has to be made every year to ensure that the account remains active.

Tenure of the investment

A PPF account usually has a lock-in period of 15 years on investment, before which funds cannot be withdrawn completely. An investor can choose to extend this tenure by 5 years after the lock-in period is over if required.

In order to open a PPF Account, offline and online procedures are made available for a persona, provided he/she meets the requirements mentioned in the eligibility criteria. Activating PPF online can be done by visiting the portal of a chosen bank or the post office.

Documents required to open a PPF account include:

  1. KYC Documents including a Driver’s License, Aadhar Card, Voter ID, etc.
  2. Residential Address Proof
  3. PAN Card
  4. Form for Nominee Declaration
  5. Passport Sized Photograph

How do you calculate expected returns from PPF?

By formula (slow and unrealistic method)

A = P [({(1+i) ^n}-1)/i] – This is the formula for calculating expected returns from PPF. A is the maturity amount, P is the principal amount invested in the PPF account, I is the rate of interest, N is the tenure for which the amount is invested in the PPF scheme. To conclude, the return will be higher for a higher investment period. Calculations using a formula can get a bit tuff, and prone to mistakes. As a result, many people prefer to opt for a PPF Calculator which is explained below.

PPF calculator (fast and realistic method)

The PPF calculator is a very user-friendly tool and helps the users with accurate information that makes this calculator a very easy option to get an idea of the returns. The only job of the user is to put basic information including the yearly investment, & the duration of the investment into the calculator. The calculator will help you with the wealth gained, total investment and the total corpus gained.

Advantages of using PPF calculator

The list below demonstrates the benefits of using an online PPF calculator:

  • This calculator is available online and allows users to get an idea about how much interest can be earned with the investment of a certain amount of money.
  • It can be accessed 24*7 & gives results in a matter of seconds.
  • An early understanding of how long the investment should be held depending on what goals you have regarding the investment.
  • One can avoid tax by using this calculator as this calculator helps make a choice whether to invest in PPF or not, thereby saving tax if they do invest.
  • It offers estimation on total investment in a financial year.

Another benefit of PPF is that the account can remain active even after maturity, without making any fresh contributions. According to experts, it continues to earn tax-free interest after maturity. As per the Public Provident Fund Scheme 2019 rules, individuals can invest a minimum amount of Rs 500 and a maximum amount of Rs 1.5 lakh or Rs 12,500 per month in one financial year in the PPF account. PPF is also tax-deductible up to the limit of Rs 1,50,000 under Section 80C of the Income Tax (I-T) Act that can be extremely helpful for tax-paying citizens.

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