Winning Bizness Desk
Mumbai. The government has maintained interest rates for small savings schemes in the October-December quarter. Public Provident Fund (PPF) continues to be a secure option for retirement planning. With guaranteed returns and tax-free interest, it offers a steady way to build long-term wealth. The 15+5+5 investment strategy can help investors accumulate a corpus of ₹1.03 crore in 25 years.
Understanding the 15+5+5 investment formula
The 15+5+5 strategy involves a basic 15-year investment period followed by two optional five-year extensions. In the first 15 years, an investor deposits ₹1.5 lakh annually. This grows to ₹40.68 lakh at a 7.1 percent interest rate, including ₹18.18 lakh from interest alone. After 15 years, the account can either be withdrawn in full or extended for two more five-year periods with or without fresh deposits.
Growth during extensions after 15 years
If the PPF account is extended without additional deposits, the fund grows to ₹57.32 lakh after 20 years, with ₹16.64 lakh added as interest. Another five-year extension increases the fund to ₹80.77 lakh, adding ₹23.45 lakh more. Continuing annual deposits of ₹1.5 lakh during the 10-year extension period can grow the total investment to ₹1.03 crore, providing ₹65.58 lakh in interest over the period.
How monthly income of ₹61,000 is generated
After 25 years, the accumulated fund of ₹1.03 crore continues to earn interest at 7.1 percent annually. This results in an approximate yearly income of ₹7.31 lakh, which translates into around ₹60,941 per month. The principal amount remains intact, ensuring a continuous stream of income without reducing the invested corpus.
Tax benefits and investment limits
PPF investments up to ₹1.5 lakh annually qualify for tax exemption under Section 80C of the Income Tax Act. Interest earned and maturity amounts are fully tax-free. The scheme is open to salaried individuals, housewives, and small business owners. Withdrawals are partially allowed from the seventh year but cannot exceed 50 percent of the balance. Investments above ₹1.5 lakh do not earn interest or tax benefits.
Eligibility and account opening details
Any individual can open a PPF account in their name at a post office or bank. Additionally, an account can be opened on behalf of a minor by a parent or guardian. The scheme is designed to encourage long-term savings while offering financial security and regular returns for retirement planning.
Pointers in a nutshell
1. PPF offers 7.1% annual interest with tax-free maturity and earnings.
2. The 15+5+5 strategy allows growth over 25 years.
3. Annual deposit of ₹1.5 lakh can yield ₹1.03 crore corpus.
4. Extensions after 15 years can be with or without fresh deposits.
5. Monthly income of around ₹61,000 is possible post 25 years.
6. Investments are eligible for tax exemption under Section 80C.
7. PPF accounts can be opened by any individual or on behalf of a minor.
