Every person dreams of having a big bank balance for the future. Often people get nervous in the name of investment because they feel that the risk of stock market can make them lose their hard-earned money. But if you make a habit of saving just Rs 12,500 every month as soon as you start earning, then in the next 24 years you can easily create a huge fund of more than Rs 1 crore. For this you do not need any miracle, but an exact formula of Public Provident Fund (PPF) and Mutual Fund. Let us know how this big milestone can be achieved even by taking less risk.
Increasing money should always start with a strong foundation. PPF is a reliable scheme run by the government, where stock market movements have no impact. Here the investor knows from the first day how much money he will get after the stipulated time. At present, the government is giving fixed annual interest of 7.1 percent on this scheme, whose track record has been quite long. Additionally, if you choose the old tax regime, you can also avail income tax exemption by depositing a maximum of Rs 1.5 lakh in a financial year.
Let us understand this with an easy example. Suppose you are 25 years old and you have started investing Rs 12,500 every month in PPF. This means that you are depositing a total of Rs 1.50 lakh in a year. When you turn 40, your PPF account will mature after 15 years. In these 15 years, a total of Rs 22,50,000 will be deposited from your pocket, whereas on this you will get only Rs 18,18,209 as interest. That means on maturity you will get a lump sum amount of Rs 40,68,209. The biggest feature of this scheme is its 'EEE' (Exempt-Exempt-Exempt) status. This means that the government does not collect a single rupee tax from you at any stage on the amount invested, interest received on it or maturity amount. The entire money comes directly into your bank account.
The game of real wealth creation starts here. You do not have to spend that Rs 40,68,209 received from the PPF account, rather put it in a lump sum in a good equity mutual fund scheme. If we assume a normal return of 12 percent per annum for the long term, then in just 9 years your money will grow rapidly to Rs 1,10,92,315. In this way, within a total of 24 years you will have a strong fund of Rs 1 crore.
Now let's talk about tax. On this income from mutual funds, you will have to pay Long Term Capital Gain (LTCG) tax at the rate of 12.5 percent, which will be around Rs 8.75 lakh. Even after paying all the taxes, you will be left with a solid amount of more than Rs 1 crore, which will become a strong support for future big needs.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
