Ways to Save More Money through Public Provident Fund Account

As far as possible we should save more money than what we normally do. Here is a way to save and make more money. We should save money not for sake of it. We should save so that we can afford better and planned future. After retirement, we can then afford to maintain the same standard of living. Then you won’t have to rely on either on others or some financial moneylender or a banker in order to finance the normal expenditures. Some after retirement even go for reverse mortgage of their house in which they are living. You can do some more enjoyment and visit many new places of interest and can afford to do more fun than the usual. Not because you want to hoard all your cash, but because you want to use it for good in future. Think about your own retirement. Enjoy watching your savings grow knowing that you won’t have to depend on someone else for your future.

Suppose that there is an individual who has started his career and his income is such that he needs to save the maximum permissible (say one hundred thousand rupees annually) in order to save income tax. One of the avenues for this is to deposit in Public Provident Fund (PPF). In case of PPF, the present rate of interest is 8.6% (this interest is tax free in the hands of the individual) and maximum amount one can deposit in this account is one hundred thousand rupees annually. One benefit is that the depositor will be saving tax not only on the present income, but also on its proceeds in all the subsequent 15 years, which is also extendable for any period in a block of 5 years on each time. The account holder can retain the account after maturity for any period without making any further deposits. The balance in the account will continue to earn interest at normal rate as admissible on PPF account till the account is closed.

If the person deposits the entire saving amount in the beginning of the financial year (say by 5th of April) and continues to do the same every year till say for thirty-five years, then he will getting tax-free the amount of Rs 2,14,03,229. Supposing that the individual starts this process at the age twenty-five, he becomes a multi Crorepati at age sixty years – which is the retirement age for the Government Servants and many private corporate employees. This amount is realistic, if the interest rate remains 8.6% throughout. This may be noted that one is only depositing Rs. 3.5 million in equal parts annually and is getting more than 21.4 millions after thirty-five years. Thus, by adopting strict discipline in managing the finance, one can be in the upper strata even after retirement.