If you are thinking about retirement and would like to take a tax free pension? That dream is still possible thanks to a Product called Public Provident Fund (PPF) account. Through disciplined investments you won’t only be stacking for the future but can also ensure ₹60,989 per month tax-free pension after retirement. We should also look at these structures in simple terms.
What is a PPF Account?
PPF account is one of the most common savings scheme with a government guarantee in India. It is however absolutely free from taxes; that implies that the amounts you deposit, the interest you receive as well as the total amount you are likely to receive at the time of maturity are legal exempt from income tax.
How to Open a PPF Account?
PPF accounts can be opened at any post office established as well as any bank branch. It is proposed to be charged at the rate of ₹100 per application, or 0.1% of the amount of deposit made, whichever is higher; subject to the limit in each financial year being ₹1,50,000 and the minimum deposit being ₹500. The account exists for just 15 years but it can be renewed in 5 year blocks thereafter.
Everything You Need to Know about PPF Account and How to Build ₹1 Crore?
Instead start with an amount of ₹1,50,000 every year. But seeing that the current interest rate is 7.1%, your savings increase at a very high rate. By the end of 15 years, the total amount you’ll receive is about ₹ 40,68,000, including Interests amounting to ₹ 18,18,000.
If you go on to further extend your PPF account in blocks of 5 years and keep contributing ₹ 1.5 lacs per year, your PPF account will be over an amount of 1 crore when you are 60 years old. With this sort of disciplined investment for 25 years, you get ₹1,03,08,014 of which ₹65.58 will be interest.
How to Receive a Monthly Pension of ₹60,989?
In PPF you can continue the account without making any fresh deposit after you are retired from service. A portion of the interest that accumulates every year, which will be approximately ₹7.31 lakh each year, can be encashed and used which as a pension. If you divide this interest by 12 months, it works up to ₹60,989 a month – all tax-free.