Public Provident Fund (PPF) is a popular investment avenue known for its stability and tax benefits.
Despite no increase in interest rates since 2020, its appeal remains strong.
But can it provide regular income after retirement?
To understand this, let’s delve into how PPF works.
PPF Maturity Rules
PPF matures after 15 years, after which it can be extended in blocks of 5 years indefinitely.
During the extension periods, you can continue to earn tax-free interest on your balance and make withdrawals.
Option to Extend the Maturity Period
After the initial 15-year term, PPF account holders can extend their accounts in blocks of 5 years without any contribution limits.
This feature makes PPF a reliable source of tax-free income post-retirement.
When your PPF account matures, if you choose to extend it for another 5 years, you can withdraw up to 60% of the accumulated amount at the beginning of the extension period.
The remaining balance continues to earn interest tax-free.
Use of PPF for Pension Income
Suppose you and your spouse each have Rs 40 lakh in your PPF accounts after 15 years.
By extending these accounts for another 5 years and considering the current interest rate of 7.1%, you can withdraw approximately 7% of the balance annually.
This tax-free income amounts to Rs 2.8 lakh per account per year, totaling Rs 5.6 lakh annually.
Given the tax-free nature of these withdrawals, this translates to a monthly pension income of approximately Rs 46,000-47,000.
This regular income can effectively support your post-retirement financial needs.
