PPF Account – Invest Rs 1000 and Earn Rs 8.5 Lakhs with Tax Benefits

Investing in schemes to secure your financial future is crucial. Among the plethora of investment schemes available in the market, choosing the right one hinges on your financial status and goals. For individuals who can set aside Rs 1000 every month, small investment schemes backed by the central government, such as the Public Provident Fund (PPF), offer an excellent option.

Public Provident Fund (PPF)

The Public Provident Fund is one of India’s most popular government-backed savings schemes. It is designed to encourage small savings and offer tax benefits along with guaranteed income. The scheme enjoys Exempt-Exempt-Exempt (EEE) status, meaning the amount invested, the interest earned, and the maturity amount are all tax-exempt. This makes it a completely tax-free savings option.

Tenure and Interest Rate

The tenure for a PPF account is 15 years. After the initial term, the account can be extended in blocks of 5 years as per the investor’s choice. One can invest between Rs 500 and Rs 1.5 lakh per year. Currently, the interest rate on PPF is 7.1 percent per annum, compounded annually.

Also Read… Earn Rs 25 Lakhs with Rs 250 | Government Investment Scheme

Partial Withdrawals and Loans

PPF accounts allow partial withdrawals from the 7th year onwards, subject to certain conditions. This feature offers liquidity to the investors in times of need. Additionally, you can take a loan against your PPF account from the 3rd to the 6th year, which helps in meeting unexpected financial needs without disrupting your investment.

How Rs 1000 Monthly Investment Grows to Rs 8.5 Lakhs

By investing Rs 1000 every month in a PPF account, you would be setting aside Rs 12,000 annually. Over the standard 15-year tenure, this consistent saving habit will grow significantly due to the power of compounding interest. However, to maximize the benefits, extending the tenure twice in 5-year blocks, making it a total of 25 years, is advisable.

Over 25 years, your total investment will be Rs 3,00,000 (Rs 12,000 annually for 25 years). Assuming the interest rate remains constant at 7.1 percent, the interest accrued will be Rs 5,24,641. Therefore, the total maturity amount you would receive is Rs 8,24,641.

How Rs 7,500 Monthly Investment Grows to Rs 24 Lakhs

For those who can invest Rs 250 daily (equivalent to Rs 7,500 monthly), the returns can be substantial. Starting this investment at the age of 25 will result in significant growth by the time you turn 40. Over 15 years, your total investment will be Rs 13,50,000 (Rs 7,500 monthly for 15 years). With an interest rate of 7.1 percent, the interest earned would be Rs 10,90,926. Therefore, the total amount received upon maturity will be approximately Rs 24,40,926.

How to Open a PPF Account

Opening a PPF account is straightforward. It can be done at any authorized bank or post office branch. Here is the process:

  1. Choose the Bank or Post Office: You can open a PPF account at any authorized bank or post office.
  2. Fill Out the Form: Obtain the PPF account opening form from the bank or post office.
  3. Submit Necessary Documents: Submit the filled-out form along with necessary documents such as:
    • Identity proof (Aadhaar card, PAN card, Voter ID, Passport)
    • Address proof (Aadhaar card, utility bills, bank statement)
    • Passport-size photographs
  4. Initial Deposit: Make an initial deposit, which can be as low as Rs 500 and up to Rs 1.5 lakh per financial year.
  5. Account Opening: Once the documentation and deposit are verified, your PPF account will be opened.

Key Features of PPF Account

  1. Tax Benefits: PPF enjoys the EEE status, which makes it one of the most tax-efficient investment options.
  2. Risk-Free Returns: Since it is a government-backed scheme, it offers risk-free returns.
  3. Flexibility: The account can be extended beyond 15 years in blocks of 5 years.
  4. Partial Withdrawals: Offers partial withdrawal facility from the 7th year onwards.
  5. Loan Facility: Loans can be availed against the balance in the PPF account from the 3rd to the 6th year.
  6. Compounding Interest: The interest on PPF is compounded annually, which helps in growing your investment significantly over the long term.

Advantages of Investing in PPF

  1. Safe Investment: As it is backed by the Government of India, the investment is safe and secure.
  2. High Returns: Though the interest rates are subject to change, they have historically been higher compared to other fixed-income investments.
  3. Tax-Free Returns: The returns on PPF are completely tax-free, making it a highly attractive investment option.
  4. Long-Term Savings: The 15-year tenure ensures that the investment grows over a long period, benefiting from the power of compounding.
  5. Financial Discipline: Regular monthly or yearly investments inculcate a habit of saving and financial discipline.

Considerations Before Investing in PPF

While PPF is a highly beneficial scheme, there are a few considerations to keep in mind:

  1. Lock-In Period: The investment is locked in for 15 years, which might be a drawback for those looking for liquidity.
  2. Interest Rate Risk: Although the current rate is 7.1 percent, it is subject to change every quarter, which might affect the returns.
  3. Investment Limit: The maximum annual investment limit is Rs 1.5 lakh, which might be a constraint for high-net-worth individuals.

Also Read… Common Mistakes to Avoid When Investing in Mutual Funds


Investing in a PPF account is an excellent way to secure your financial future with a safe and tax-efficient instrument. With as little as Rs 1000 per month, you can grow your savings significantly over the years due to the power of compounding and the attractive interest rates offered. Additionally, the flexibility of extending the account beyond the initial 15-year term and the option for partial withdrawals and loans make PPF a versatile and reliable investment option. Whether you aim to save for retirement, a child’s education, or simply want to build a financial cushion, PPF is a wise choice for long-term, risk-free growth.

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