PPF for Regular Income: With spouse’s help, how to build Rs 1.33 crore tax-free corpus in 20 years

PPF is a government-backed plan with a lock-in period of 15 years. After 15 years, you can either withdraw the entire generated value or extend the account for another 5-year block. A Public Provident Fund allows a deposit of Rs 1.5 lakh annually that can help you save tax. Yet another reason why people are inclined to invest in PPF. Under Section 80C of the Income Tax Act, you can claim a deduction of up to Rs 1.5 lakh annually. Drawing your attention back to the question of how you can generate a tax-free income of Rs 1.33 crore with the help of your spouse. Let’s understand it through calculations. 

PPF for Regular Income: How can spouses earn tax-free corpus of Rs 1.33 crore?

A Public Provident Fund is a government-backed scheme that allows a deposit of Rs 1.5 lakh annually. But according to the PPF rules, a person can open only one PPF account in their name. There is no option to open a joint account in PPF. Both husband and wife can have their own separate PPF accounts. This allows each individual to contribute the maximum allowed amount and claim tax benefits independently.

How can spouses build Rs 1.33 crore tax-free corpus?

To generate a tax-free income of Rs 1.33 crore from Public Provident Fund in just 20 years, both husband and wife will have to deposit Rs 1.5 lakh every year in their respective PPF accounts. They can deposit it as a lump sum, or they can also deposit Rs 12,500 every month (Rs 1.5 lakh annually). Note, the total annual contribution cannot exceed Rs 1.5 lakh. The PPF account matures in 15 years, but spouses will have to extend their investment period in blocks of 5 years, which means a total of 20 years of investment with a Rs 1.5 lakh annual contribution.

Also Read: How to get over Rs 18 lakh/year tax-free income from Public Provident Fund? 

When do you need to apply for extension?

To keep your PPF account active after maturity and continue your contribution, you need to submit an extension application to the bank or post office where the account is held. This application should be given before one year before the maturity date. If you miss this deadline, you won’t be able to contribute to the account.

Tax benefits in PPF

Under Section 80C, you can avail of tax exemption of up to Rs 1.50 lakh in a single financial year. PPF investment is kept in the EEE category. This means that your investment, interest, and maturity amount are completely tax-free. 

PPF calculation Conditions

• Target Corpus: Rs 1.33 crore
• Investment Period: 20 years
• Investment amount: Rs 1.5 lakh annually
• Annualised rate of return: 7.1 per cent

If both husband and wife deposit Rs 1.5 lakh annually in their PPF accounts and continue this investment for 20 years, then both will end up depositing Rs 30 lakh each in their accounts. With a 7.1 per cent annualised interest rate in PPF. Both husband and wife will get an estimated Rs 36,58,288 as interest in their respective accounts. This way, both will get a total of estimated Rs 66,58,288 in 20 years. 66,58,288 + 66,58,288 = Rs 1,33,16,576. Thus, resulting in an estimated Rs 1,33,16,576 or 1.33 crore in 20 years.