There will be a government guarantee. Investments will be secure, steady returns will be generated. You will also have tax benefits.
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PPF Investment: Many people think that investing means high income or requires a large amount. But in reality, you can create a large corpus in the long term with a small amount. The Public Provident Fund (PPF) is a best example of this. It is guaranteed by the government. The investments are secure, steady returns are generated. You also get tax benefits.
Even those with low income can invest in PPF. It only takes Rs.500 per year to open this account. If you invest Rs.150 per day in it, you can earn more than Rs.24 lakh. This money can be used for post-retirement needs, children’s higher education or future needs.
Compound power in PPF
What makes investing in PPF special is compounding. Every year, interest is added to the amount in your account. In subsequent years, interest is also earned on that interest. The PPF account initially matures for 15 years. After that, it can be extended for five years at a time. The longer the money is in the account, the greater the compounding effect.
How to get Rs. 24 lakhs with Rs. 150?
Let’s say you invest Rs. 150 every day in this scheme. That means the investment per month will be Rs. 4,500 (150 × 30 days). The investment per year will be Rs. 54,000. If you extend the PPF to a block of five years after maturity and continue investing for 20 years, you will get good returns. After 20 years, the amount you deposit will be Rs. 10,80,000. At the current interest rate of 7.1%, the interest you will get on this will be approximately Rs. 13,30,000. That means the amount you will get at the time of maturity will be Rs. 24,10,000.
How to open an account?
PPF account can be easily opened at the post office or bank. Most banks also offer online facility. You can deposit monthly or once a year as per your income. The sooner you open it, the bigger the chance you have of saving funds.
Tax Benefits
The Government of India guarantees the PPF account. Stock market fluctuations and economic uncertainties do not affect your investment. It suits those who want safety and low risk. Another major advantage of PPF is tax benefits. There is tax exemption on the amount invested in it. There is also no tax on the interest earned on the money in the account. Also, the amount received at the time of maturity is completely tax-free. Schemes that offer these three benefits are very rare.
