PPF Tax-Free Income: The Public Provident Fund, or PPF, is a savings scheme started by the Indian government to help people save money safely and earn good returns. It is known as a long-term and low-risk investment. One of the best things about PPF is that the money you put in, the interest you earn, and the full amount you get at the end are all tax-free under certain sections of the Income Tax Act.
The interest rate is fixed and decided by the government every three months. Right now, the PPF interest rate is 7.1%. If you invest properly and continue for a long time, you can actually earn more than ₹70,000 every month and the best part is, it’s all tax-free.
What Is the PPF Scheme and How Does It Work?
PPF is a very popular investment plan for people who want to save for retirement or future goals. It has a fixed lock-in period of 15 years. After 15 years, you can continue the same account for more years in blocks of 5 years. You can do this again and again, for as long as you want. You don’t have to open a new account just keep the same one going.
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You can open a PPF account at your nearest post office or any major bank. Every year, you must deposit at least ₹500 to keep the account active. The highest amount you can put in each year is ₹1.5 lakh.
Can You Take Money Out Before 15 Years?
Even though the PPF account has a 15 year lock in, you can still take out a part of your money early but only after 5 years have passed from when you opened the account. For example, if your account started in 2024-25, your first withdrawal can be made in 2030-31 or after that.
But there are limits. You can only take out money once a year, and you can withdraw up to 50% of the account balance from either four year before the current year or the last year whichever is lower. This rule helps keep the account stable while also giving you some flexibility.
What Happens After 15 Years?
Once your PPF account finishes its 15-year period, you have two choices. You can close the account and take all the money, or you can extend it for another 5 years. During the extension, you can either keep depositing money or just let the account grow on its own without new deposits.
According to Zee Business, if you keep investing ₹1.5 lakh every year even after 15 years, your money keeps growing. This is where PPF becomes very powerful, thanks to the effect of compound interest.
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How Much Money Will You Have After 15, 20, and 25 Years?
If you put in ₹1.5 lakh every year for 15 years, your total investment will be ₹22,50,000. The interest you earn could be around ₹18,18,209, which means the final amount becomes ₹40,68,209.
If you extend for another 5 years and keep investing, then in 20 years, you would have invested ₹30,00,000 in total. You may earn about ₹36,58,288 in interest, making your total corpus ₹66,58,288.
If you go on for 25 years, your total investment becomes ₹37,50,000, and the interest may grow to ₹65,58,015. Your final maturity amount would be around ₹1,03,08,015.
After 27 years of investing ₹1.5 lakh each year, you would have invested ₹40,50,000. The estimated interest would be ₹81,06,422, and the total amount in your PPF account would be ₹1,21,56,422.
How to Start Earning ₹70,000+ a Month from PPF
After investing for 27 years and reaching a total balance of ₹1.21 crore, you can start withdrawing the interest as your income. You don’t have to withdraw the full amount. During the extension period, PPF rules allow you to withdraw the interest once a year.
With a 7.1% interest rate, the yearly interest on ₹1,21,56,422 would be around ₹10,13,035. This means you can earn ₹71,925 every month and it’s all tax-free.
