Rs 1.5 lakh yearly in PPF: Check how it can grow into Rs 1.54 crore tax-free corpus

Public Provident Fund (PPF) remains one of the most popular government-backed long-term savings schemes for retirement planning. By investing Rs 1.5 lakh every year from age 30 till age 60, an investor can potentially build a tax-free corpus of around Rs 1.54 crore.

PPF accounts mature after 15 years, but investors can extend their accounts for unlimited blocks of 5 years with continued contributions. This allows investors who start at age 30 to continue investing until retirement at age 60. The scheme currently offers 7.1% annual interest, compounded yearly.

The maximum amount that can be invested in a PPF account in a financial year is Rs 1.5 lakh. To maximise interest earnings, the annual contribution should ideally be deposited as a lump sum on or before April 5 of every financial year, and the Rs 1.54 crore corpus assumes a constant 7.1% interest rate.

Here are the assumptions:
● Starting age: 30 years
● Investment till: 60 years
● Annual investment: Rs 1.5 lakh
● Interest rate: 7.1% per annum
● Investment period: 30 years
Estimated corpus at age 60: Rs 1.54 crore

Out of the estimated corpus of Rs 1.54 crore:
● Total investment over 30 years: Rs 45 lakh
● Estimated interest earned: Rs 1.09 crore
However, this illustration assumes that the PPF interest rate remains unchanged at 7.1% throughout the entire 30-year period.

The PPF interest rate is notified by the Ministry of Finance from time to time. Interest is calculated every month on the lowest balance available in the account between the close of the fifth day and the last day of the month, and is credited at the end of each financial year.

The biggest advantage of starting at age 30 is the longer compounding period. Even a delay of 10 years can significantly reduce the final retirement corpus because the investment gets less time to compound and generate returns.

PPF enjoys EEE (Exempt-Exempt-Exempt) tax status:
● Investments qualify for deduction under Section 80C for taxpayers opting for the old tax regime
● Interest earned is tax-free
● Maturity proceeds are completely tax-free
This makes PPF one of the most tax-efficient retirement savings options available to long-term investors.