By saving ₹1900 every month in PPF, a fund of ₹1 crore can be created for the child. Let us understand in how many years you can create a fund of Rs 1 crore from PPF and how much you will have to invest for this.
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New Delhi: Every parent dreams that their child’s future should be completely financially secure. If you also want to create a big fund for your child’s education, marriage or retirement, then Public Provident Fund is a great and safe option. The magic of power of compounding in PPF is such that you can create a fund of ₹ 1 crore for your child with a small savings of just ₹ 1900 per month.
1. If you deposit ₹ 1900 every month for 50 years as soon as the child is born, then a fund of Rs 1 crore will be created:
* Monthly investment: ₹ 1900 (saving only ₹ 63 per day)
* Annual investment: ₹22,800
* Interest rate: 7.1% per annum (existing rate decided by the government)
* Investment Period: Approximately 50 years (after maturity of 15 years the account has to be grown in blocks of 5-5 years)
* Total Deposit Amount: In 50 years you will deposit a total of ₹ 11,62,800.
*Earnings from interest: Due to the power of compounding, you will get only interest of approximately ₹ 91,80,000 on this investment.
* Total amount on maturity: After 50 years the total fund will be ₹1,03,42,000 (more than Rs 1 crore).
That means when your child turns 51, he will have become a millionaire without spending anything from his own pocket.
2. If you start investing for your child at the age of 5 years, then by depositing ₹ 2,700 every month for 45 years, a total investment of ₹ 14.58 lakh will be made and interest of more than ₹ 87.58 lakh will be earned, due to which a total fund of ₹ 1.02 crore will be created at the age of 50 years.
It is important to know things related to PPF
The biggest feature of PPF investment is that it is tax-free. It comes under ‘Exempt-Exempt-Exempt’ (EEE) category. This means that under Section 80C of Income Tax, tax exemption is available on investments up to Rs 1.5 lakh annually. Apart from this, the interest received every year and the entire maturity amount of Rs 1 crore received at the end will also be completely tax-free.
2. 15 years lock-in and 5 years extension
The maturity period of PPF account is 15 years. If you want to achieve the target of Rs 1 crore, then you do not have to close this account after completion of 15 years. You can extend it indefinitely in blocks of 5 years each by filling the form.
Any parent can open a PPF account in the name of their minor child in any post office or bank. When the child turns 18 (major), the entire operation of the account comes into his hands and he himself can continue this investment further.
You can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh in a PPF account in a financial year. If you increase the investment amount from ₹1,900 to more, the target of ₹1 crore will be achieved much before 51 years.