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PPF: how much and how long should you invest to become a crorepati

PPF: how much and how long should you invest to become a crorepati

July 8, 2022
5 min read
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PPF: how much and how long should you invest to become a crorepati
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Public Provident Fund (PPF) is one of the best investment tools for risk-averse investors to become a crorepati. PPF is a government-backed small saving scheme that is highly secure. PPF is an extremely popular investment among investors looking to invest in debt instruments for long-term goals but with minimum risk. 

the rate of return on PPF investment is moderate compared to other high-risk investment options. the PPF is also loaded with various tax benefits, tax exemption and security of capital. as per the Income Tax Act, the PPF account falls under the exempt-exempt-exempt (EEE) category, which means, you can invest up to ₹1.5 lakh per annum in a PPF account and can claim income tax deduction. not only this, the interest earned on PPF investment and PPF maturity amount is also exempted from any kind of income tax outgo. 

when it comes to the long term investment products that offer guaranteed returns, PPF is the one that provides the highest returns. the investments in PPF can be made in a lump sum or in a maximum of 12 installments. you need to make a minimum of ₹500 investment every year and the maximum investment amount allowed is ₹1.5 lakh for each financial year. the tenure of the PPF account is 15 years. the interest rate of PPF is revised by the Indian government each quarter depending on the prevailing economic circumstances in the country. 

if you invest properly and consistently in a PPF scheme, you can easily accumulate a financial corpus worth ₹1 crore or even more by the time of redemption. all you have to do is extend your PPF account after 15 years maturity period and continue investing consistently till the time you reach your goal of ₹1 crore.

how long and how much should you invest

if you are looking to generate a corpus of ₹1 crore through PPF, you need to be highly patient and regularly invest for 25 years. here we assume the rate of interest to be 7.1 percent for the entire investment period. with the power of compounding interest, you would be able to create this huge corpus through the periodic investments in PPF. The longer you stay invested, the bigger it grows. 

now, let's assume you start investing ₹12,500 per month which is the maximum monthly investment that can be done in PPF, and continues the monthly investment for 15 years, then you will earn over ₹40.6 lakh at the time of maturity of your PPF account (assuming the rate of interest remains 7.1% throughout the investment period). if you extended the PPF investment period for the next five years, then at the end of 20 years (first extension), you would create a corpus of ₹66.6 lakh by investing ₹1.5 lakh per year. if you extend the investment period for another five years, and continue to invest ₹1.5 lakh per year, then at the end of 25 years, your PPF account balance will be over ₹1 crore. note that all these calculations have been based on the assumption that the PPF rate of interest remains constant at 7.1 per cent for the whole investment period.

but how long can you extend a PPF account?

well, the good news is that you can extend the PPF account for an infinite number of times in a block of 5 years. as per rules, a PPF account has a maturity period of 15 years and at the end of 15 years, the investors can choose to increase the PPF investment period in a block of 5 years. 

planning to invest in a PPF account?

it will be a wise decision to invest your money in a safe debt investment instrument like PPF. you can use the CRED PPF calculator to explore more on the PPF investment amount, monthly contribution, interest rate, investment tenure etc. CRED PPF calculator is an easy to use online tool which can come handy if you are planning to invest in a PPF scheme. you can simply enter the monthly investment amount, rate of interest, and tenure to get an estimate of how much you can earn through your investment. as PPF accounts have a maturity period of 15 years, the tenure will be automatically set at 15 years, however, you can extend the investment period in a block of 5 years as allowed in the PPF investment rule. 

use CRED PPF calculator now