General Provident Fund is one of the popular small savings schemes of Post Office. It is also known as pension plan.
The maturity period of this scheme is 15 years. Thus, salaried employees invest in it.
And through this scheme they can accumulate some funds for retirement. But it can be used not only to build a large fund but also for retirement income.
PPF scheme
That way, if you read the rules of PPF carefully and invest as a smart investor according to those rules, you can use this government account for a good tax-free pension after retirement.
The maturity period of General Provident Fund is 15 years. But in 5-5 year increment (PPF Extend Rules) you can continue for as long as you want. That means you can pursue the plan for 20 years or 25 years or 30 years or 35 years.
1.50 lakh per annum investment
If you continue the scheme without investing even after maturity, the funds in the account will continue to earn interest at the current rate of interest. If you invest, the scheme will continue to give you the same returns as before maturity. Currently the interest rate of this scheme is 7.1 percent per annum.
Suppose you have started investing in a PPF account. If you start investing in this scheme even at the age of 35, you have the option to extend the scheme for 10 years even after 15 years of maturity. That means, when you turn 60, you can run this plan for 25 years.
7.1 percent interest
There is a rule to deposit a maximum of Rs 1.50 lakh in PPF in a financial year. If you deposit Rs 1.50 lakh every year in your account, at an interest rate of 7.1 per cent, with a maturity period of 15 years, each account will have an amount of Rs 40,68,209. If you continue to invest this way for another 5 years, i.e. next 10 years, after 25 years, each account will have Rs.1 crore.
Now it’s time for your rest. In such a scenario, you can extend the PPF account for another 5 years without investing. 1 Crore funds in your account will continue to be charged interest. Assuming the current rate of interest to be 7.1 percent, each account accrues interest of Rs.7,31,300 per annum.
60 thousand return per month
If you continue the account without investing anything, you can withdraw the entire fund every year for an extended period of 5 years. In such a scenario, if you take only the interest money, you will spend every year Rs. 7,31,300 can be drawn, which is Rs.60,000 (Rs. 60,917) on a monthly basis. At the same time, it is important to note that no tax will be levied on this withdrawal.
