Summary of this article
Rs 1.5 lakh yearly builds Rs 1 crore corpus
Compounding boosts long-term wealth creation
Interest can generate steady retirement income
The Public Provident Fund (PPF) scheme is among the most popular long-term small savings schemes offered by the Department of Posts, Government of India. It is also an extremely safe and reliable investment scheme, as it comes with a sovereign guarantee. In addition, it comes with triple tax benefits on the investment, interest earned, and the maturity, which is also why many people use it for building a retirement corpus. At present, the deposit rate is 7.10 per cent per annum, which is reviewed by the government every quarter.
How PPF Works
You can invest a minimum of Rs 500 and a maximum of Rs 1.50 lakh every year in a PPF account. The scheme has a lock-in period of 15 years, but after that, it can be extended in blocks of five years as many times as one wants. This long duration is important, because PPF works best when you stay invested for long. It uses compounding, meaning you earn interest not only on your investment l, but also on the interest already added.
Building A Rs 1 Crore Fund With PPF
To build a large retirement corpus, discipline is key. Let's say you invest the maximum amount of Rs 1.50 lakh every year. Here’s how your money can grow (assuming a 7.10 per cent interest rate):
After 15 years: your corpus would grow to around Rs 40.68 lakh, including your investment of Rs 22.50 lakh and the rest being the interest earned on the deposit.
20 years (first 5-year extension): Rs 66.58 lakh
25 years (second 5-year extension): Rs 1.03 crore
So, by continuing your investment for 25 years (15 years + two extensions of 5 years each), you can build a corpus of over Rs 1 crore.
Turning It Into A Monthly Income
Once your corpus reaches this threshold of Rs 1.03 crore corpus, you can stop investing further but continue to keep the money in the PPF account. It will continue to earn interest.
At a deposit rate of 7.10 per cent per annum, the annual interest earned would be about Rs 7.30 lakh and the monthly income would be around Rs 61,000.
This means you can use the interest as a monthly “pension” while your main amount remains untouched.
PPF does not actually give a monthly payout. You can withdraw money only once in a financial year. So, you will receive the yearly interest and then manage it monthly on your own.
If you consistently invest Rs 1.5 lakh every year and stay invested for about 25 years, you can build a large fund of around Rs 1 crore. This fund can then generate roughly Rs 61,000 per month from interest alone, helping you create a stable income during retirement without touching your savings.
