How much do you need to invest monthly to build a corpus of Rs 1 crore?
Currently, the PPF bears an interest rate of 7.1% per annum and interest is calculated on a monthly basis. Its interest rate is reviewed by the government on a quarterly basis.
Money can be invested in a PPF account for 15 years, as per the guideline. However, if one does not need the money after 15 years, the same account can be extended within one year after maturity for another five years and so on to gain more benefits.
So, suppose someone starts investing Rs 12,500 per month (the maximum monthly investment that can be made in PPF) and continues the PPF account till 15 years, he/she will build a corpus of more than Rs 43 lakh at maturity (at the current interest rate of 7.1%).
Now, if the amount is not withdrawn and the same PPF account is extended for five years, the investment of Rs 1.5 lakh per annum made for 20 years (first extension) at 7.1% will bring the total corpus at Rs 73 lakh.
Now, if the account is not closed and extended for five years, then that Rs 1.5 lakh per annum at 7.1% interest for 25 years will turn the investment into a corpus of Rs 1 crore. Overall, the balance of the PPF account will be Rs 1,16,60,769 (which is more than 1 crore).
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PPF investing is best suited for conservative investors who don’t like to take on the risks typically associated with stock market-focused investing, and who want fixed income securities. PPF investment enjoys 80C under which an investor can put up to Rs 1.5 lakh.
It also offers EEA tax status and comes with a 15-year lock-in period. The amount at maturity and the aggregate interest earned during the investment period are exempt from tax.