the magic of the Public Provident Fund (PPF) investment scheme is known to only those investors who are disciplined and have the patience to be invested for a very long term. PPF is an investment tool that can help you accumulate ₹1 crore in your account. however, the key to earning a good return from your investment lies in starting your savings from an early stage and continuing the investment for the long term in a disciplined manner. the PPF is an investment option that gives you long-term earning benefits.
PPF scheme was launched by the National Savings Organization in the year 1968 with an aim to make small savings a lucrative investment option for domestic investors. the maturity period of a PPF account is 15 years, after which you can either withdraw all your money or extend the PPF account for a block of 5 years each.
the PPF offers an interest rate of more than 7 percent per annum. the Indian government reviews the PPF rate of interest each quarter depending on the prevailing economic circumstances in the country.
as per the PPF rules, you can invest a minimum of ₹500 and a maximum of ₹1.5 lakh every year in a PPF account. deposits can be done maximum in 12 transactions. so, if you deposit the maximum allowed sum in a PPF account, you can accumulate ₹1 crore in the long term.
how does PPF magic work?
you can adopt two different ways to reach your financial goal through PPF. for your reference, we have presented here an assumptive calculation on how you can accumulate ₹1 crore by investing in PPF:
your first option is to continuously invest in PPF until your desired financial corpus grows. for calculation, let's assume that the current rate of interest for PPF of 7.9% stays the same for the overall investment tenure.
if you start your PPF investment as soon as you start earning, you can accumulate ₹1 crore via PPF by investing a sum of ₹4,585 per month for 35 years.
however, if you want to earn ₹1 crore before that, you will have to increase your investment sum to ₹6,945 per month for 30 years at an interest rate of 7.9%.
if you want to get ₹1 crore even before 30 years, you need to invest ₹10,720 every month for 25 years to reach your goal of ₹1 crore corpus.
you can invest ₹12,500 per month only as the maximum limit to invest in a PPF is ₹1.5 lakh yearly. so, if you decide to invest the maximum amount i.e. ₹12,500 per month, you can get your ₹1 crore in only 23 years.
however, note that you won't be able to withdraw this money before 25 years as the extension can take place only in a block of 5 years.
₹4,584 at 7.9% interest rate
₹ 1 crore
₹6,945 at 7.9% interest rate
₹ 1 crore
₹10,720 at 7.9% interest rate
₹ 1 crore
₹12,500 at 7.9% interest rate
₹ 1 crore
the second option is to keep your investment tenure fixed at 15 years and leave your money with PPF to earn interest and keep growing the fund until it reaches your goal i.e ₹1 crore.
so, for example, if you invest ₹6,270 per month for 15 years in a PPF account, your funds will grow to ₹21.87 lakh assuming the interest rate remains 7.9% for the entire investment period. after completing 15 years, you can stop making further investments and leave the overall corpus in the same PPF account for another 20 years. with interest yields, your fund will grow to ₹1 crore.
if you increase the monthly investment amount to ₹9,165, you can earn ₹ 1 crore in 30 years. as shown in the previous example, out of these 30 years, you will be investing for the first 15 years and after that, you don’t have to make any investment. let your overall financial corpus with PPF for another 15 years and it will grow to ₹1 crore.
monthly contribution for 15 years
no-contribution investment period
₹ 1 crore
₹ 1 crore
why is PPF so popular?
as you can see, you need at least 23 years of continuous investment to earn ₹ 1 crore through the PPF scheme, still, it is one of the most popular investment options. how?
secure investment option: well, the foremost reason can be security. the PPF is a government scheme and hence people have more trust in it. apart from that, it is also one of the best investment options for many conservative investors who prefer to invest in a fixed-income option. PPF investment is one of the best and safest debt instruments because of the sovereign backing of the Central government of India.
income tax benefits: also, PPF is the only option that gives you one of the maximum returns among the fixed income instruments. it is also one of the best tax-saving options. investors can claim a tax deduction of up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961. also, interest earned on PPF investment is also entirely tax exempted. PPF is the best debt investment product for investors who fall in the highest income tax bracket as these individuals get a higher tax-exempt refund. these investors can even claim deductions on their investments.
start with a low amount: for those investors who can't save much every month, PPF is the best option as you can open a PPF account online with just ₹100 per month. however, make sure you make an investment of ₹500 every fiscal year to continue the account.
flexible liquidity option: although the maturity period of a PPF account is 15 years, it does offer a liquidity option too. in case of a financial emergency, you can take a loan against your PPF balance. however, you need to make an investment for at least three years to avail this facility. if required, you can even partially withdraw funds from your PPF account after a span of seven years.
open an account in the name of minors: if you want you can open a PPF account in the name of a minor. however, note that you can’t hold a PPF account jointly, hence you need to nominate one or more persons and can decide the share in your PPF balance.
well, now that you know all about how PPF can help you accumulate ₹1 crore in your account, it's time to start your investment. you can use the CRED PPF calculator provided below to plan your PPF investment strategy.
CRED PPF calculator