The Indian economy is full of a variety of investment schemes meant to cater to the technologically advanced needs of its investors. The Public Provident Fund (PPF) is one such scheme, and it is one of the most popular long-term savings schemes. Introduced first by National Savings Organization in 1968, it was established with the objective of providing retirement security to self-employed and non-EPF-covered people. Its tax-free returns, tax deduction, and compounding power have turned it into a household name in all Indian households. Knowing how to use a PPF calculator can make your investing time more efficient and improved returns through this great money tool.
What is PPF?
A Public Provident Fund is a government-backed savings scheme. The PPF is a risk-free mode of saving with the twin benefit of return and deduction of tax under Section 80C of the Income Tax Act. The earnings on interest are tax-free, further making the scheme popular.
The interest rate of the PPF as of today is 7.1%, compounded annually. The minimum one can invest every year is ₹500, and the maximum is ₹1.5 lakh. PPF also has a 15-year lock-in period, which can be extended by a period of 5 years when the account matures. Knowing these facts makes use of a PPF calculator in the best possible manner to plan and determine the best investment term.
PPF Calculator: A Financial Planning Tool for Investors
A PPF calculator is an online calculator, and it helps to calculate the maturity value of an investment after a specific time duration. By inserting various variables such as the annual deposit, rate of interest applicable now, and the duration in years invested, investors learn how their capital grows over a period of time.
Finding Best Investment Tenure
The power of PPF lies in its potential to grow wealth with longer investment tenure. Let us discover how various time spans influence the returns using a PPF calculator.
Lock-in Period (15 Years):
By investing ₹1.5 lakh every year, the final maturity value of lock-in period can be as much as around ₹40.68 lakh, as illustrated above.
Extension Without Withdrawal (20 Years):
Even investors are able to opt for extending accounts 5 years without withdrawal on maturity and continue making contributions all the while. This is good with the additional benefits of compounding.
20-year sample calculation
With the same annual contribution of ₹1.5 lakhs, corpus at maturity will be around ₹66,58,288.
Extension With Contributions (Over 20 Years):
If the investors extend the PPF and contribute for more than 20 years, that is, to 25 years:
On the same terms, at 25 years, it would yield roughly ₹1,04,08,669.
Strategic Considerations
If the lock-in period is to be made default or prolonged the same is a decision keeping in mind a number of considerations such as financial objectives, liquidity requirements, and the level of interest being earned. What attracts PPF is the protection and government guarantee and putting on top of the same long-term tax-free compounding, none of the instruments of small saving can provide end to end.
Cautions and Considerations
Even though the PPF is an excellent investment tool, its exclusive reliance on future planning may limit diversification. With a pre-determined cap on annual contributions and fixed rate of interest, its value automatically changes with inflation pressures and policy rates.
PPF Calculator: Your Trusty Friend
Having a PPF calculator helps successfully organize your finances in the future by presenting an absolute picture of probable returns within several timelines. It simplifies it to select the right decision and have assurance that your investment achieves your personal goals.
Summary
PPF is still the preferred investment method among many people due to government security and tremendous tax benefits. What is PPF? It is a long-term investment strategy to structure finances with tax advantage. Through a PPF calculator, one can determine one’s term and investment with one’s financial needs for return, resulting in maximum return. With 7.1% per annum interest compounded every year, small investments every year can amount to a gigantic humongous corpus in the long term.
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Understanding options both on the regular 15 years and extensions provided can be extremely helpful to the top corpus maturity. Investors will have to find the PPF calculator to serve as a good partner in going through the intricate components that lead towards the maturity sum. Despite the scheme’s seemingly positives, investing in more diversified instruments is wise to provide safety against market turbulence. Thus, although PPF is a risk-free investment, it has to be a component of a broader, diversified financial plan. Always remember, the key is matching the investment time horizon with individual financial goals in keeping with market predictions.
Disclaimer
Analysis carried out here is for general purposes only. The investor needs to take into account all the advantages and disadvantages of investment in the Indian financial system. PPF, though a government scheme, needs to be viewed in the light of a diversified portfolio of investments.
Author Bio:
This is Aryan, I am a professional SEO Expert & Write for us tech blog and submit a guest post on different platforms- Technoohub provides a good opportunity for content writers to submit guest posts on our website. We frequently highlight and tend to showcase guests.
