The Department of Economic Affairs, Ministry of Finance, issued new guidelines regarding Public Provident Fund (PPF) accounts for minors, multiple PPF accounts, and the extension of PPF accounts for Non-Resident Indians (NRIs). These guidelines, applicable from October 1, 2024, were issued to streamline the management of small savings accounts under the National Small Savings (NSS) schemes.
Key Changes in PPF and Other Small Savings Schemes
- PPF Accounts Opened in the Name of a Minor:
- Interest at the Post Office Savings Account (POSA) rate will be paid on irregular accounts until the minor turns 18. From that point, the regular interest rate will apply.
- The maturity period will be calculated from the date the minor becomes an adult.
- Multiple PPF Accounts:
- The primary PPF account will earn the regular scheme interest rate if the deposits remain within the annual limit.
- The balance in the second PPF account will be merged with the primary account, and any excess balance will be refunded at 0% interest.
- Any additional PPF accounts will earn 0% interest from the day they are opened.
- Extension of PPF Accounts by NRIs:
- NRIs can continue to hold their active PPF accounts opened before becoming NRIs. These accounts will earn POSA interest rates until September 30, 2024. From October 1, 2024, the interest rate will be 0%.
How to Accumulate ₹1 Crore Using a PPF Account
The Public Provident Fund (PPF) is one of the most popular long-term savings schemes due to its tax-free returns, guaranteed interest, and government backing. While it has an annual contribution limit of ₹1.5 lakh, with disciplined investing and the magic of compounding, one can accumulate substantial wealth over the long term.
Strategy to Achieve ₹1 Crore with PPF
To reach ₹1 crore through a PPF account, consistent yearly investments for 15-25 years at the current PPF interest rate of 7.1% (subject to change) can help. The following table shows how the power of compounding will help you achieve this goal.
PPF Investment Table: Annual Investment of ₹1.5 Lakh
| Year | Annual Contribution (₹) | Interest (₹) | Total Value at Year End (₹) |
|---|---|---|---|
| 1 | 1,50,000 | 5,325 | 1,55,325 |
| 2 | 1,50,000 | 15,352 | 3,20,677 |
| 3 | 1,50,000 | 25,769 | 4,96,446 |
| 4 | 1,50,000 | 36,582 | 6,82,779 |
| 5 | 1,50,000 | 47,797 | 8,79,786 |
| 6 | 1,50,000 | 59,423 | 10,87,579 |
| 7 | 1,50,000 | 71,465 | 13,06,338 |
| 8 | 1,50,000 | 83,932 | 15,36,270 |
| 9 | 1,50,000 | 96,833 | 17,77,608 |
| 10 | 1,50,000 | 1,10,177 | 20,30,624 |
| 11 | 1,50,000 | 1,23,973 | 22,95,597 |
| 12 | 1,50,000 | 1,38,233 | 25,72,830 |
| 13 | 1,50,000 | 1,52,966 | 28,62,662 |
| 14 | 1,50,000 | 1,68,184 | 31,65,414 |
| 15 | 1,50,000 | 1,83,899 | 34,81,467 |
| 16 | 1,50,000 | 2,00,124 | 38,11,265 |
| 17 | 1,50,000 | 2,16,874 | 41,55,233 |
| 18 | 1,50,000 | 2,34,163 | 45,13,821 |
| 19 | 1,50,000 | 2,52,005 | 48,87,494 |
| 20 | 1,50,000 | 2,70,417 | 52,76,743 |
| 21 | 1,50,000 | 2,89,414 | 56,82,157 |
| 22 | 1,50,000 | 3,09,012 | 61,04,169 |
| 23 | 1,50,000 | 3,29,228 | 65,43,397 |
| 24 | 1,50,000 | 3,50,078 | 70,00,475 |
| 25 | 1,50,000 | 3,71,580 | ₹74,76,055 |
| 26 | 1,50,000 | 3,93,750 | ₹79,71,207 |
| 27 | 1,50,000 | 4,16,607 | ₹84,86,814 |
| 28 | 1,50,000 | 4,40,169 | ₹90,24,483 |
| 29 | 1,50,000 | 4,64,456 | ₹95,85,939 |
| 30 | 1,50,000 | 4,89,488 | ₹1,00,72,427 |
Key Insights:
- With an annual investment of ₹1.5 lakh, it will take approximately 30 years to accumulate ₹1 crore, assuming the current 7.1% interest rate remains stable.
- You can achieve this goal faster if the interest rate increases, or if you invest the maximum limit early in the financial year to take advantage of full-year compounding.
Factors to Consider:
- Interest Rate Changes: The PPF interest rate is revised quarterly, so the actual time to reach ₹1 crore may vary based on rate changes.
- Maximizing Returns: Contributing the full ₹1.5 lakh in April (start of the financial year) helps maximize compounding benefits.
- Tax Benefits: PPF investments offer tax deductions under Section 80C, making this a great option for those looking for long-term, tax-free returns.
With the right strategy and discipline, a PPF investment can help build significant wealth over the long term, providing both security and growth.
Something went wrong. Please refresh the page and/or try again.
