Looking to get Rs 1 crore as returns from Public Provident Fund (PPF) investments? To achieve this goal, investors need to be patient and regularly invest for 25 years at the current interest rate of 7.1 percent, utilizing the maximum limits of PPF investments allowed in one financial year, according to calculations provided by Groww -- an investment platform.
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Periodic investments in PPF for a long-term can do the trick with the power of compounding. Longer the money stays invested, the quicker it grows, experts say.
As per calculations, if someone starts investing Rs 12,500 per month (the maximum monthly investment that can be done in PPF) and continues the PPF account till 15 years, he may earn over Rs 43 lakh at the time of maturity (in accordance with the current 7.1 percent rate of interest).
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Now, the same account can be extended within one year of maturity for further five years and so on to earn more benefits. After investing Rs 1.5 lakh per year for 20 years ( first extension) at 7.1 percent, the PPF account balance will be about Rs 73 lakh.
Now, in order to get Rs 1 crore, the investor needs to extend the account for further five years (second extension). After investing Rs 1.5 lakh per year for 25 years at 7.1 percent, the PPF account balance will be Rs 1,16,60,769 (which is more than 1 crore).
Let’s understand this calculation:
According to Groww, one can use this formula to compute the deposited amount, interest, etc. This formula has been given below:
F = P
Here F is the maturity of PPF (which is to be calculated). P stands for annual installments, while I stand for rate of interest. N is the total number of years.
Investors can also use Groww's PPF calculator to see the results by putting the tenure and total amount invested.
There is another benefit with PPF too. The account can remain active even after maturity, without making any fresh contributions. It continues earning tax-free interest after maturity, according to experts.
(Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions)
First Published: Jun 18, 2020 9:04 PM IST
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