Public Provident Fund (PPF) remains one of the most popular retirement schemes in India. With its assured returns and tax-free benefits, it is considered a safe and rewarding long-term investment option.
PPF is backed by the government and currently offers an annual interest rate of 7.1%. These rates are periodically reviewed by the government. The scheme encourages disciplined savings and contributions of Rs 500 to Rs 1.5 lakh can be made in a financial year.
The lock-in period for this scheme is 15 years. It also offers partial withdrawal and loan facilities. With so many benefits, investors look at PPF as a retirement corpus that can fund their basic monthly expenses.
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After the initial lock-in period, PPF investments can be extended in blocks of five years. During this period, investors may or may not add contributions, but their corpus will continue to earn interest. This feature can be helpful in creating a long-term monthly pension plan.
Assuming we try to build Rs 1 crore corpus through PPF, here's how it can be done:
- Yearly Investment: Rs 1,50,000
- Time Period (In Years): 25
- Rate of Interest: 7.10%
- Invested Amount: Rs 37,50,000
- Interest Earned: Rs 65,58,015
- Maturity Value : Rs 1,03,08,015
After this period, simply let the corpus earn the 7.1% interest. Every financial year, the corpus will generate an interest of Rs 7,31,869. You can withdraw this amount once every financial year. If you use this withdrawn interest evenly, you get:
Rs 7,31,869 / 12 = Rs 60,989
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This method allows investors to use the interest earned from their PPF corpus while keeping the principal amount of Rs 1.3 crore intact.
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