To extend your PPF account with contributions, you must notify the post office or bank where the account is maintained. You need to fill out the relevant form and submit it within one year of reaching maturity
New Delhi: Public Provident Fund (PPF) is a government-backed small saving scheme that is extremely popular among risk-averse investors looking to invest in debt instruments for long-term goals like retirement savings. PPF offers moderate returns and is loaded with tax benefits, tax exemption and security of capital. The interest earned as well as the returns are not taxable under the Income Tax Act.
The interest rate offered on PPF is higher than most other investment products of similar tenure that offer guaranteed returns. The investments in PPF can be made in a lump sum or in a maximum of 12 installments. The minimum investment allowed is Rs 500 and the maximum is Rs 1.5 lakh for each financial year. The current interest rate is 7.1% p.a and the tenure of the PPF account is 15 years.
If invested properly and consistently in PPF, one can accumulate a crore or even more by the time of redemption. All an investor needs to do is extend their PPF account after 15 years maturity period and continue investing consistently to reach the Rs 1 crore goal.
PPF calculator
In order to accumulate Rs 1 crore from PPF, investors need to be patient and regularly invest for 25 years at the current interest rate of 7.1 percent. Assuming that Rs 1.5 lakh are invested annually by a person at 7.1% rate in a PPF account, then the time taken for them to become a crorepati would be 25 years. This is because periodic investments in PPF for the long term can do the trick with the power of compounding.
The longer the money stays invested, the bigger it grows. If someone starts investing Rs 12,500 per month (the maximum monthly investment that can be done in PPF) or Rs 1.5 lakh per annum and continues the PPF account till 15 years, they will earn over Rs 40.6 lakh at the time of maturity, assuming the interest remains 7.1% throughout the investment period.
If the account is further extended for five years, then after investing Rs 1.5 lakh per year for 20 years (first extension) at 7.1 percent, the PPF account balance will be about Rs 66.6 lakh. Extending the account once more for a period of 5 years, if the investor continues to invest Rs 1.5 lakh per year, then after 25 years, the PPF account balance will be over Rs 1 crore, assuming interest remains constant at 7.1 per cent for the whole investment period.
PPF account extension rule
PPF account has a maturity period of 15 years, but one can extend one’s PPF account by submitting PPF extension form in the 15th year of account opening, choosing interest with investment option. One can extend the PPF account for an infinite number of times in a block of 5 years.
PPF tax benefits:
PPF account falls under the exempt-exempt-exempt (EEE) category where one’s investment up to Rs 1.5 lakh per annum is income tax exempted. Apart from this, PPF interest rate and PPF maturity amount is also exempted from any kind of income tax outgo.
