For a lot of folks looking to build a retirement corpus and grow their wealth over time, the Public Provident Fund (PPF) is a go-to investment option. PPF provides a fixed interest rate that gets reviewed every quarter, plus you can enjoy a tax-free corpus if your account has been active for at least five years.
The PPF account matures after 15 years, but investors can keep extending it in five-year increments as long as they continue to contribute. If they stop contributing, they can still extend it once for another five years after it matures.
Investments in PPFs of up to Rs 1.50 lakh in a financial year come with tax benefits under the old tax regime. An investor can invest a minimum of Rs 500 and a maximum of Rs 1.5 lakh in a financial year in PPF.
If you decide to go with PPF to build a solid tax-free retirement corpus in the long term, how much can you actually accumulate by investing Rs 1.50 lakh each financial year for 20 years?
What kind of tax-free wealth can you create with a Rs 1.50 lakh investment every financial year in PPF? If someone invests Rs 1.5 lakh between April 1-5 of every financial year for 20 years into PPF, they can create a tax-free retirement corpus exceeding Rs 66 lakh..
With an interest rate of 7.1% per annum, the total amount invested over two decades would reach Rs 30 lakh. But, thanks to compounding, interest earned during this period would be around Rs 36.58 lakh.
| Particulars | Value |
| Yearly investment | Rs 1,50,000 |
| Time period | 20 years |
| Interest rate | 7.1% |
| Total invested | Rs 30,00,000 |
| Total interest | Rs 36,58,288 |
| Maturity value | Rs 66,58,288 |
This takes the total maturity value to approximately Rs 66.58 lakh.
Can a PPF account be extended after 15 years?
The PPF has a maturity period of 15 years starting from the end of the financial year in which the account was opened.
Account holders can choose to extend their PPF account and keep making deposits for another five years. However, they must decide to extend their account before the end of the one-year period after the maturity period ends.
If the PPF account remains inactive without any deposits for more than a year, the account holder will not have the option to continue the account with deposits.
