Public Provident Fund (PPF) is a boon to employees (for that matter anybody who wants to save) who do not have Employee Provident Fund as a measure of financial safety for their future.
PPF is a scheme where in a citizen can open an account (for as low as Rs.500/-) in SBI or Post Offices and start depositing money (monthly/yearly) through a financial year.
What is the benefit?
1. Tax savings – Entire amount (to the maximum limit of Rs.70,000/- per annum) is tax exempted u/s 80C.
2. Amount invested earns an interest of 8% per annum compounded.
3. Tenure for this investment is 15 years. You can’t come out of the scheme in between, although partial withdrawal is possible after 7 years. Money is locked in safe hands.
4. Power of compounding ensures you get a handsome return at the end of the tenure.
5. Regardless of the interest rates available for your deposits in normal savings/recurring /fixed deposit accounts, the interest rate is fixed throughout the tenure, so you can get benefit of averaging out also.
For those who want to start saving early for a bigger expense in future after 15 years, it is better to park a portion of your money here in this instrument.
For example, 70000 invested annually for 15 years would give a return of Rs.20,52,700 (whereas you would have saved per year Rs.10,50,000/- in total) giving you a return of 100% on total money invested with tax exemption and interest accrued is also tax-free.
Year-1 – 75600
Year-2 – 157248
Year-3 – 245427
Year-4 – 340662
Year-5 – 443515
Year-6 – 554596
Year-7 – 674564
Year-8 – 804129
Year-9 – 944059
Year-10 – 1095184
Year-11 – 1258399
Year-12 – 1434671
Year-13 – 1625044
Year-14 – 1830648
Year-15 – 2052700 (Final maturity if you keep invested through every year for Rs.70000/- max)
What else, you are waiting for, go ahead and start saving in this instrument and reap benefits.