PPF Strategy To Build Rs 2-Crore Fund: Investment Journey Explained

The Public Provident Fund (PPF) is an ideal investment instrument for long-term wealth creation in India, as it offers secure returns along with tax benefits. This government-backed scheme encourages disciplined savings with a long-term investment horizon. The minimum investment tenure is 15 years and it can be increased in blocks of 5 years each.

Investors can invest between Rs 500 and Rs 1.5 lakh in a PPF account in a financial year.

The 15-year investment horizon allows the funds to earn compound interest over time and grow substantially. Moreover, PPF provides the flexibility to extend the investment period in blocks of five years after maturity with and without contributions. So, it could be a valuable addition to the portfolios of investors looking forward to wealth accumulation in the long run.

One of the key features of PPF is its ‘EEE’ (Exempt-Exempt-Exempt) tax benefits. This means that not only contributions up to Rs 1.5 lakh per financial year in PPF qualify for deductions but the interest earned is also tax-free. Moreover, the maturity amount is also fully exempt from tax, maximising post-tax returns. This makes PPF suitable for long-term financial planning and it can be used to build a retirement financial corpus.

Let’s assume that an investor wants to build a Rs 2-crore corpus with PPF. Here’s what their investment journey will look like.

At present, PPF offers 7.1% returns p.a., which is subject to periodic review by the government.  

Yearly contribution: Rs 1.5 lakh

Returns: 7.1%

Time period: 35 years

Total investment amount: Rs 52.5 lakh

Interest earned: Rs 1.74 crore

Final corpus: Rs 2.27 crore

Hence, to build a Rs 2-crore corpus via PPF, it will take around 35 years, which means it is important to start as early as possible. As the PPF investments are capped at Rs 1.5 lakh per annum, investors need to remain invested for 35 years to build this corpus.

To be clear, one will need to be invested for 35 years since PPF norms allow for extensions in blocks of five years. The above calculation shows, an investors will end up investing Rs 52.5 lakh over 35 years and accumulate a fully tax-free amount of Rs 2.27 crore via EPF.