Public Provident Fund (PPF) has the exempt-exempt-exempt (EEE) status, which means there is no income tax on contributions up to Rs 1.5 lakh in a financial year and the interest and principal amount on maturity or upon reaching 15 years. PPF is open to all Indians. Minors can also open an account, provided the parents or guardians manage it until they become adults.

The interest is calculated on the lowest account balance between the fifth and the end of the month and credited to the account at the end of the financial year. The minimum investment in a PPF account is Rs 500, and the maximum is Rs 1.5 lakh per year, making it one of the most flexible small deposit schemes for retirement in addition to its EEE status.

How PPF Can Help Generate Rs 1 Crore Corpus

Suppose a person starts investing Rs 1 lakh in PPF annually at the age of 30. When he retires at 60, his investments will be Rs 30 lakh in 30 years. So, if the assumed interest rate is 7.1 per cent, the interest component will be Rs 72.5 lakh and the total corpus will be around Rs 1.02 crore.

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Let’s explore another scenario if the person starts investing Rs 1 lakh annually at the age of 25. In that case, he would invest a total of Rs 35 lakh, and the corpus would be around Rs 1.51 crore.

For the same period, if he invests Rs 1.5 lakh annually, the corpus at maturity will be around Rs 2.26 crore, including Rs 52.50 lakh principal and Rs 1.73 crore interest.

This calculation shows that the corpus grows faster in later years due to compounding interest, one of the primary reasons experts recommends people to invest early.

The PPF scheme was launched by the finance ministry in 1968 to allow people to save small amounts and build a solid retirement corpus over the long term. Historically, PPF provided more than 7.0 per cent. Between 1980 and 2017, the minimum returns were 8.0 per cent.

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PPF also offers a premature withdrawal and loan facility against the accumulated corpus. The PPF account can also be renewed indefinitely in blocks of five years after maturity.

While PPF enjoys the EEE status with considerable annual returns, the Senior Citizens Savings Scheme (SCSS) gives 8.2 per cent interest annually, the highest rate among all other small saving schemes. However, the SCSS scheme is only available for senior citizens, those 60 and above. On the other hand, PPF is open to all Indian citizens, irrespective of age. Thus, PPF could be one of your primary investment vehicles for retirement, given its ability to tap the compounding growth along with its EEE status.