PPF Rules: If you read the PPF rules carefully and invest as a smart investor according to those rules, then you can use this government account to get a good tax-free pension after retirement.
PPF as a Regular Income: Public Provident Fund, one of the popular small savings schemes of the post office, is also known as a retirement scheme. Due to the maturity of this scheme being 15 years, many employed people invest in it, so that they can raise some funds for retirement. But very few people know that it can be used not only to create a big fund but also for pension income. If you read the rules of PPF carefully and invest as a smart investor according to those rules, then you can also use this government account for a good tax free pension after retirement. Know how…..
Rules for extending PPF
The maturity period of Public Provident Fund is 15 years. But you can continue it for as long as you want in 5-5 year increments (PPF Extend Rules). That is, you can continue the scheme for 20 years or 25 years or 30 years or 35 years. After maturity, you can extend it for 5 years at a time by continuing to invest or without investing anything. If you continue this scheme after maturity without investing anything, then the funds in the account will continue to earn interest according to the current interest rate. If you invest, then this scheme will continue to give the same returns as before maturity. Let us tell you that currently the interest rate on the scheme is 7.1 percent per annum.
Withdrawal rules on extension
Suppose you do not withdraw money when the scheme matures and extend it for 5 years. In the first case, you extend after maturity without investing anything. In the second case, you continue investing as before during the extended period. In the first case, you can withdraw the entire amount once every year in the extended 5 years. Whereas in the second case, you can withdraw up to 60 percent of the money every year (PPF Withdrawal Rules).
Create a fund before retirement
Suppose you have started investing in a PPF account. If you start investing in this scheme even at the age of 35, then you will have the option to extend this scheme for 10 years even after the maturity of 15 years. That is, you can run this scheme for 25 years, when you will be 60 years old.
There is a rule to deposit a maximum of Rs 1.50 lakh in a financial year in PPF. If you deposited Rs 1.50 lakh every year in your account, then at the rate of 7.1 percent interest, on maturity of 15 years, there will be an amount of Rs 40,68,209 in each account. Suppose you continue investing in this way for 5 more years i.e. for the next 10 years, then after 25 years, there will be Rs 1 crore in each account.
Tax free pension will be available after retirement
Now the time has come for your retirement. In such a situation, you can extend the PPF account for 5 more years without investing. Interest will continue to be charged on the fund of 1 crore present in your account. If the interest rate is assumed to be the same as the current one i.e. 7.1 percent, then interest of Rs 7,31,300 will be added annually on each account.
If we look at the withdrawal rules on extension, then if you continue the account without investing anything, you can withdraw the entire fund once every year in the extended 5 years. In such a situation, if you withdraw only the interest money, then you can withdraw Rs 7,31,300 every year, which will be around Rs 60,000 (Rs 60,917) on a monthly basis. At the same time, no tax will be levied on this withdrawal.
