Power of compounding: Become crorepati with ₹12,500/month PPF contribution—Here's how you can build ₹6.75 crore corpus

When planning your investments, it is important form a plan based on your current finances, risk tolerance, and future goals. Smart financial planning is guided by the desire to meet your financial targets, build wealth and provide long-term stability amid ever increasing cost-of-living, medical and lifestyle inflation.

The public provident fund (PPF) is a top choice when it comes to long-term financial planning. Launched by the Centre in 1986, it is a reliable, low-risk government backed savings scheme with consistent and guaranteed returns and can be used to meet financial goals such as funding of wedding, children's education abroad, buying a house, retirement fund or even building wealth.

It is among the safest investment options for tax planning and an effective wealth builder, you can open a PPF account at a post office or bank by submitting an application form, photo and stated KYC documents.

Become a crorepati with ₹12,500/month in PPF

Today, we calculate how much corpus is generated from an investment of ₹12,500 per month in PPF, at interest rate of 7.1% (this quarter), and how the age you begin investing at could impact the total savings till retirement (60 years of age).

• If you start investing at age 20: ₹12,500 per month deposited for 40 years is investment of ₹60 lakh and earns you interest of more than ₹2.69 crore, for total maturity payout of over ₹3.29 crore at age 60.
• If you start investing at age 25: ₹12,500 per month deposited for 35 years is investment of ₹52.50 lakh and earns you interest of more than ₹1.74 crore, for total maturity payout of over ₹2.26 crore at age 60.

• If your start investing at age 30: ₹12,500 per month deposited for 30 years is investment of ₹45 lakh and earns you interest of more than ₹1.09 crore, for total maturity payout of over ₹1.54 crore lakh at age 60.
• If your start investing at age 35: ₹12,500 per month deposited for 25 years is investment of ₹37.50 lakh and earns you interest of more than ₹65.58 lakh, for total maturity payout of over ₹1.03 crore lakh at age 60.

Power of compounding: PPF account for children

For children or minor applicants, a parent or guardian can open a joint PPF account which can be converted once the account holder turns 18 years old.

• If you start their investment at age 10: ₹12,500 per month deposited for 50 years is investment of ₹75 lakh and earns you interest of more than ₹6 crore, for total maturity payout of over ₹6.75 crore at age 60.

• If you start their investment at age 15: ₹12,500 per month deposited for 45 years is investment of ₹67.50 lakh and earns you interest of more than ₹4.05 crore, for total maturity payout of more than ₹4.72 crore at age 60.

Delaying investments impacts compounded growth

• If your start investing at age 40: ₹12,500 per month deposited for 20 years is investment of ₹30 lakh and earns you interest of more than ₹36.58 lakh, for total maturity payout of over ₹66.58 lakh at age 60.
• If your start investing at age 45: ₹12,500 per month deposited for 15 years is investment of ₹22.50 lakh and earns you interest of more than ₹18.18 lakh, for total maturity payout of over ₹40.68 lakh at age 60.

Why choose PPF? Key highlights

Tenure: The account is for 20 years, including a lock-in period of 15 years. It also offers indefinitely renewable extension in five-year blocks each.

Risk: It is a risk-free investment with guaranteed return as per fixed interest rate of 7.1% this quarter. Notably, this is reviewed each quarter.

Tax benefit: It is EEE instrument where investment is exempt from taxes, the maturity amount is exempt from taxes, and interest earned is also exempt from income tax at time of payout.

Tax saving: A total of ₹1.5 lakh annual contribution is exempt under Section 80C of the Income-Tax Act for old tax regime. There is no similar benefit at present under the new tax regime.

Loan collateral: The corpus is accepted as loan collateral after 1 year (up to 25% of balance).

Withdrawals: Partial withdrawal is allowed after five years of opening an account only for specified reasons. Full withdrawal is allowed after the 15 years lock-in period ends.