Scheme : A variety of retirement systems have been developed, including the Public Provident Fund (PPF). This method is quite effective for long-term savings. But have you ever considered that PPF can potentially supply you with a steady income?
Even the most knowledgeable professionals will struggle to educate you about this method of profiting from PPF. Determine how this will function.
How does this Jugaad work?
PPF allows you to deposit a maximum of Rs 1.5 lakh per year. Currently, this scheme pays 7.1% interest, which increases with compounding. The maturity duration of a PPF is 15 years, but you must extend it twice in 5-year increments and continue investing. This means you have to keep putting Rs 1.5 lakh in it for 25 years.
A fund of Rs. 1 crore will be accumulated in 25 years.
When you put Rs 1.5 lakh in PPF every year for 25 years, your total investment will be Rs 37,50,000, and you will get Rs 65,58,015 in interest at a rate of 7.1%. As a result, your PPF account will have a total balance of Rs 1,03,08,015.
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Maintain the money deposited in the account.
Even after 25 years, you are not required to remove this money from the account; rather, it must remain placed in the PPF account. If you do this, whatever amount you put in your PPF account will continue to earn interest in accordance with the PPF calculations. You can withdraw the entire sum from this account at any time, or you can make a partial withdrawal once every year.
This is how you would arrange for an income of Rs.60,000.
If you retain the entire Rs 1,03,08,015 in the account, you will receive Rs 7,31,869 in interest at a 7.1% rate. Simply withdraw the interest amount once a year. Rs 7,31,869 divided over 12 months equals Rs 60,989. This manner, you can set aside Rs 60,989 every month. Your account will also have a balance of Rs 1,03,08,015.
Keep this in mind in case of an extension.
To extend your PPF account with contributions in 5-year blocks, you must submit an application to the bank or post office where you have the account. This application must be submitted within one year of the maturity date. Take great care to ensure that you continue to contribute to your PPF account for the next 25 years.
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