PPF Account: At the end of 15 year term of PPF account an individual can earn Rs 21,10,517.
PPF Account Interest Rate: It is that time of the year when most of the salaried individuals in offices are seen scrambling for collecting receipts of money invested during the year in order to get income tax benefits. Among many tax benefits being offered by the government, investments done under the Section 80C of the income tax act allows individuals income tax concessions of up to Rs 1.5 lakh annually. Investments which qualify for income tax deductions under Section 80C include premium paid on life insurance policy, interest along with principal amount paid as instalment of home loan, tuition fees paid for child’s education, investments done under National Savings Certificate and investments done under public provident fund. Savings and investments under Section 80C of the Income Tax Act allows individuals benefits of income tax deductions along financial independence for future. (Also Read: Your Small Savings Scheme Investment Fetches These Returns In March Quarter)
Among many investments schemes that offer benefits of deductions under Section 80C of the Income Tax Act, Public Provident Fund is one such scheme that allows benefits of savings and income tax deductions under the Section 80C of the Income Tax Act. (Also read: PPF, Other Small Savings Schemes Offer Up To 8.6% Return In March Quarter. Compare Interest Rates)
Here is all you need Public Provident Fund (PPF) Account
Any individual can invest up to maximum of Rs 1.5 lakh in the Public Provident Fund account with any bank or post office. Government currently offers 7.9 per cent interest per annum which gets accumulated and after 15 years the individual gets the amount along with the interest. (Also Read: All You Need To Know About The Post Office Monthly Income Scheme Account)
PPF accounts come under the EEE category of investments which implies that the investments, the income and the maturity amount are all tax-free. (Also Read: Five Things To Know About The Post Office Savings Account)
If an individual saves Rs 1.5 lakh annually in his or her PPF account and the interest rate remains unchanged at 7.9 per cent per annum, the individual will get Rs 43,60,517 on the maturity after 15 years. By investing Rs 1.5 lakh every year in PPF account the individual will save Rs 22,50,000 and will get Rs 21,10,517 as income tax free interest. (Also Read: Five Things To Know About National Savings Certificates (NSC))
On top of savings, the individual can also save maximum income tax of Rs 46,800 every year (If an individual comes under 30 per cent tax slab). If an individual comes under 20 per cent tax slab, then also he or she can save income tax of Rs 31,200 every year. (Also Read: Want To Set Up A Recurring Deposit Account At The Post Office? All You Need To Know)
Here is an example of how much interest an individual gets by investing Rs 1.5 lakh per annum:
| Deposit | Opening Balance | Interest | Closing Balance | |
|---|---|---|---|---|
| First Year | 150,000.00 | 150,000.00 | 11,850.00 | 161,850.00 |
| Second Year | 150,000.00 | 311,850.00 | 24,636.15 | 336,486.15 |
| Third Year | 150,000.00 | 486,486.15 | 38,432.41 | 524,918.56 |
| Fourth Year | 150,000.00 | 674,918.56 | 53,318.57 | 728,237.12 |
| Fifth Year | 150,000.00 | 878,237.12 | 69,380.73 | 947,617.85 |
| Sixth Year | 150,000.00 | 1,097,617.85 | 86,711.81 | 1,184,329.66 |
| Seventh Year | 150,000.00 | 1,334,329.66 | 105,412.04 | 1,439,741.71 |
| Eighth Year | 150,000.00 | 1,589,741.71 | 125,589.59 | 1,715,331.30 |
| Ninth Year | 150,000.00 | 1,865,331.30 | 147,361.17 | 2,012,692.48 |
| 10th Year | 150,000.00 | 2,162,692.48 | 170,852.71 | 2,333,545.18 |
| 11th Year | 150,000.00 | 2,483,545.18 | 196,200.07 | 2,679,745.25 |
| 12th Year | 150,000.00 | 2,829,745.25 | 223,549.87 | 3,053,295.13 |
| 13th Year | 150,000.00 | 3,203,295.13 | 253,060.31 | 3,456,355.44 |
| 14th Year | 150,000.00 | 3,606,355.44 | 284,902.08 | 3,891,257.52 |
| 15th Year | 150,000.00 | 4,041,257.52 | 319,259.34 | 4,360,516.87 |
At the end of 15 year term of PPF account, on top of interest amount earned of Rs 21,10,517, an individual also saves income tax of Rs 7.02 lakh. By investing Rs 22,50,000 over 15 years, an individual can earn Rs 28,12,517 on which individual has to pay zero tax.
Source: NDTV Profit
