How To Decide The Amount To Invest In Ppf

By Author: ArjitChalmela
Total Articles: 27
Comment this article

One of the most popular schemes available to raise a corpus for retirement is the Public Provident Fund. PPF or Public Provident Fund is a scheme started by the National Savings Organization in 1968 with the objective of promoting small savings. A PPF account can be opened by any resident Indian.

Even though the PPF has a lock in period of 15 years, it is very popular because of the triple tax benefit that it provides.

The PPF provides tax benefits at all the three stages of investing –

Investment made in PPF gets a tax deduction under Section 80C of the Income Tax Act up to Rs. 1,50,000Any interest earned on the deposit is exempt from tax.The withdrawal is completely tax free

The scheme allows investment between Rs. 500 per year to a maximum of Rs. 1,50,000 per year. The scheme is very simple to operate. You can make between 1 to 12 deposits in a year. If a deposit is made before the fifth of the month, you earn interest on the contribution for the month.

But when the deduction is a part of a crowded section and the account ...
... has a lock in period, how can one decide how much to invest in PPF?

How to decide how much to invest in PPF:

The first thing to consider is whether you want to invest in the scheme. The PPF is a scheme that provides excellent returns over the long term. It is also very low risk. This is because the scheme is guaranteed by the Government of India.

Any investment in the scheme gets a deduction under Section 80C so you need to consider whether you have any balance unclaimed deduction. Any investment in ELSS, NSC, EPF, repayment of home loan principal gets a deduction under Section 80C. If you have already made any other investment, then you can use any unclaimed deduction to make an investment in PPF.

If you want to build a dedicated retirement fund out of your PPF, then you can use a free PPF calculator that is available on different websites. This calculator will find out the maturity value after the end of the lock in period of 15 years. The scheme gives you an option to extend the deposit for a further period of 5 years after the end of the 15 years. Once you extend the deposit, you can choose to extend it without any contributions or extend it with contributions. If you extend it without contributions, you will continue to earn interest on the already invested corpus which is locked in for another 5 years. On the other hand, if you choose to make further contributions, you can use the calculator to find out the value of the deposit.

Using the PPF account calculator can help you find out the interest you earn every year and understand the value of compounding. This scheme is an excellent scheme that has helped a lot of people provide for their retirement. It can successfully be used for corpus building.