PPF: Rs 1.2 lakh/y vs Rs 10K/m — which builds more?
The Public Provident Fund (PPF) is a government-backed savings scheme that allows investors to create a tax-free corpus in the long term. The Finance Ministry sets the interest rate for this scheme every quarter. For the July-September quarter, the PPF interest rate is 7.1% per annum, with a maturity period of 15 years.
Investors can choose between two investment frequencies: a lump sum investment of Rs 1.2 lakh per year or a monthly investment of Rs 10,000. Both options result in an investment of Rs 18 lakh over 15 years.
The interest on PPF is calculated annually based on the lowest account balance between the 5th and the last day of each month. It is credited at the end of the financial year and is not paid out periodically. The maturity amount for a monthly investment of Rs 10,000 is approximately Rs 31,55,680, while the maturity amount for a lump sum investment of Rs 1.2 lakh per year is around Rs 32,54,568. Thus, the lump sum investment option earns nearly Rs 99,000 more than the monthly investment option.
It is important to note that the PPF interest rate is assumed to remain unchanged for the entire 15-year period, and the lump sum investment is made till April 5 of every financial year. Additionally, the PPF offers tax benefits under the old tax regime, with tax-free benefits at investment, interest, and maturity stages. However, this benefit is only applicable if the account is held for at least five years.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
