Public Provident Fund is a completely secure Government of India scheme with a competitive and assured interest rate. Furthermore, the returns are fully tax-free. Plus, as icing on the cake, we can demand a tax deduction for the amount invested in PPF under Section 80C. Interest rates have dropped dramatically in recent years, making it increasingly difficult to find investments that provide inflation-beating returns. You can invest in a variety of ways to make one crore as income. The majority of the options, however, come with a moderate to high risk. Public Provident Fund (PPF) is the best investment choice if you are a low-risk investor and want to save Rs 1 crore between you and your spouse. The Public Provident Fund is one of the oldest savings plans, with a current interest rate of 7.1%, which is higher than the national average. Subscriptions can be made in a lump sum or 12 instalments, with a minimum of Rs.500/- and a maximum of Rs.1,50,000/- per financial year.
Features of PPF
The account has a 15-year term and can be extended for one or more blocks of five years without losing interest if requested in writing within one year of maturity. Subscribers who do not pay the minimum subscription sum of Rs 500/- in a financial year will have their account closed. Only when the account is reinstated, the subscriber would not be able to receive a loan or make a partial withdrawal. The subscriber is not permitted to open another PPF account in addition to the one that has been closed.
How can you invest more than Rs 1.5 lakhs?
In a PPF account, you cannot invest more than Rs 1.5 lakhs in a financial year. You can make contributions to your spouse's PPF account. Only your account and those accounts where you are the guardian are subject to the investment limit of Rs 1.5 lakhs. Contributions to your own Public Provident Fund (PPF) account, or the PPF accounts of your spouse or children, can be deducted under Section 80 C. Income from money given to a partner is lumped together with the giver's income under income tax laws. However, since the interest and maturity amounts of a PPF are tax-free, you will not face any tax consequences.
So, if you give your wife Rs.1.50 lakhs and she invests it in a PPF account, you must report the interest income on your tax returns. If you have already invested Rs.1.50 lakhs in your PPF A/c, you are entitled to double the cap.
How PPF can Help You Create Rs 1 crore With Your spouse?
The current rate of interest on PPF is 7.1% per year, compounded on a yearly basis. The central government adjusts interest rates every three months. Given the large number of people who invest in PPF, the prices are unlikely to change significantly. Here are a few situations in which you and your partner could accumulate Rs 1 crore.
When the interest rate is at 7%
Taking an average of 7% interest, you'll need to invest Rs 1.5 lakh every year for you and your partner, for a total of Rs 3 lakhs per year over the next 18 years. You would have put in Rs 54 lakhs that is Rs 3 lakhs multiplied by 18 years and your money would have increased to Rs 1.02 crores.
18 Years * 3 Lakhs =54 Lakhs
Interest Rate at 7%
= Rs 1.02 Crores
When the interest rate is 6.5%
Similarly, considering a decline in interest rates in the future, at 6.5%, you will have to invest Rs 1.5 lakh per year for you and your partner, for a total of Rs 3 lakhs per year over 19 years. You would have put in Rs 57 lakhs that is Rs 3 lakhs multiplied by 19 years, and your money would have surged to Rs 1.07 crores.
When the interest rate is 8%
Consider an average interest rate of 8%, you'll need to put Rs 1.5 lakh per year for you and your partner, for a total of Rs 3 lakhs per year over 17 years. You would have put in Rs 51 lakhs that is Rs 3 lakhs multiplied by 17 years and your money would have risen to Rs 1.02 crores.
By opening a PPF account in the name of a partner, an investor can increase his or her investment cap from 1.5 lakh to 3 lakh and benefit from income tax exemption on PPF interest and maturity amounts in both PPF accounts. Deposit the entire sum, say Rs 1.5 lakhs, at the start of the year to obtain the maximum amount of tax-free interest. If you deposit the money before April 5th, you will get interest for the month of April as well as the remaining 11 months. You can generate your own scenario based on your current savings and the time span during which you want to construct and earn Rs 1 crore.