As the name Public Provident Fund – popularly known referred to as PPF – indicates, this instrument was designed to generate long term corpus for the use of Indians in their advanced age. The word ‘public’ indicated that just about everyone could open one and ‘provident fund’ indicate that it is meant to serve a similar purpose.
Significantly, the numbers 15 and 5 have special connection with PPF. Any PPF account matures 15 years after opening it. Also it is not necessary that an investor closes the PPF account and withdraws all the money on completion of 15 years after opening the account. Any PPF account can be virtually stretched to any number of years – but in multiples of 5 – even after the completion of 15 years. The convenience of extending the PPF account by blocks of 5 years helps many to amass a significant amount of money in the long term and get full tax break on the principal, interest and total maturity amount.
How much will I get after 15 years in PPF
One can invest a maximum of Rs 1.5 lakh in a PPF account in one financial year. On the other hand, one has to invest a minimum about of Rs 500 every year. If one invests Rs 1.5 lakh a year, one will get a total return of Rs 40,68,209 after 15 years. Of this amount, Rs 22,50,000 will be principal – the investment you make – and Rs 18,18,209 will be the interest.
What is the 15 + 5 + 5 formula
In the 15 + 5 + 5 formula, the number 15 indicates the initial maturity period of 15 years. The digit 5 appearing twice indicates that you are extending it by two blocks of 5 years or 10 years. Thus, the total investment duration will be 25 years.
- Investment per year: Rs 1.5 lakh
- Rate of interest: 7.1%
- Period: 25 years
- Total corpus at the end of 25 years: Rs 1,03,08,015, or Rs 1.03 crore
The point to note is that the entire maturity proceeds of Rs 1.03 crore will be free from any income tax when you withdraw the amount. The PPF belongs to the E-E-E category of investments.
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