When it comes to retirement planning, most people want to make their post-job life secure and self-reliant. For this, Public Provident Fund (PPF) can be a great option. It is not only a means of tax saving, but also a means of creating a strong retirement fund in the long term. If you invest correctly, this scheme can also give a regular pension-like income of up to Rs 60,000 every month — that too for life.
What is PPF and why is it special?
PPF is a long-term investment scheme backed by the government, which gives safe returns away from market volatility. A maximum of Rs 1.5 lakh can be invested in it annually and currently it is getting 7.1% annual interest, which keeps increasing every year through compounding.
Don’t withdraw the money, let it stay in the account
Now the most important thing here is that when 25 years are completed, then you should not withdraw all this money, but let it stay in the account. Because if the money stays in PPF, you will keep getting interest on it every year. If you want, you can withdraw only the interest amount once a year – this can become your monthly income.
Remember, the mandatory lock-in period for a PPF account is 15 years. After the lock-in period expires, you have an option to either withdraw the whole amount or extend the investment period in blocks of 5 years. After 15 years, the two extensions of 5 years each are allowed, which means a PPF account can be run for a total period of 25 years.
How will a fund of Rs 1 crore be created?
Suppose you invest Rs 12,500 every month (i.e. Rs 1.5 lakh annually) in PPF for 25 years continuously. In this case, your total deposit amount will be Rs 37,50,000. At an interest rate of 7.1%, you will get an interest of about Rs 65,58,015. That means, in total, you will have a fund of Rs 1,03,08,015.
This way you will get pension of more than Rs 60,000 every month
If you keep the entire Rs 1.03 crore in the account, then next year you will get Rs 7,31,869 interest on it. If you divide this interest over 12 months, then you will get an amount of around Rs 60,989 every month – just like a regular pension. And the best part, your principal amount (Rs 1.03 crore) will remain safe in the account.
Smart way of retirement planning
If PPF is used with the right planning and discipline, then it can not only become a means of saving tax but also a strong retirement fund. This scheme is especially useful for the middle income group and salaried class, who are looking for a secure future by avoiding risk.
To extend the PPF, it is necessary to renew it every 5 years. For this, an application has to be given in the bank or post office and this work has to be done within one year of the maturity of the account. If you complete this process on time, then you can continue investing for 25 years without interruption.
Also read: EPFO New Rules 2025: 5 key conditions you have to fulfill to withdraw PF money
Summing up…
So if you are planning for a safe, tax-free and permanent income, then do not ignore PPF. A disciplined investment of just Rs 12,500 per month can give you a fund after 25 years, which can become a source of your regular income throughout life – and that too without any market risk.