7th Pay Commission: Should govt employees invest in Public Provident Fund (PPF)? Know how much you earn on Rs 500, Rs 1000, Rs 5000 deposits

Ever since the time 7th Pay Commission recommendations were approved, it has generated mixed emotions in various section of central government employees. Some employees have even shown their disappointment and rolled out a list of demands, while some have shown extreme positivity. In the midst of criticism and good news, for central government employees it is advisable that they take their personal finance issues in hand on an as is basis and move forward, irrespective of what is happening at the government level to ensure they benefit to the maximum. How to benefit the maximum from the current 7th Pay Commission salary? Read on:

Central government employees have investment options which helps them in not depending on just their salaries. However, as a majority of central government employees are not comfortable in investing in stock markets, there are various other options available to them that carry no risk. These are current government schemes that will help government employees earn massive amounts of money on their investments.

It needs to be noted that, a central government employee already can invest 10% of basic salary plus dearness allowance under National Pension Scheme (NPS). This is scheme is mandatory for government employees. 

Interestingly there is also one more scheme named as Public Provident Fund (PPF), which a government employee must take note of. 

PPF is said to be a tax-savings cum savings scheme, which was introduced by National Saving Institute of the Ministry of Finance. This has helped the general public a lot too. Even those who do not earn more than Rs 15,000, can invest in this scheme at minimum amount of just Rs 500 to earn big in future course. The maximum investment can be done up to Rs 1,50,000 in an year.

Generally, the goal of PPF is to provide savings in small amounts for people, helping them cultivate the habit of investment.

Investing in PPF is very flexible, as there are no limits to how many time one should invest. However, investment amount can vary and depend upon on your choice.

One can link PPF investment with the desired bank and let every month a certain amount get deducted.

The maximum return PPF gives is about 8.1% per annum. One big reason, that PPF stands out is that it is completely tax free and money is compounded annually.

This means, that you will earn every year an appreciation of your desired amount by means of compound interest.

However, PPF is not a short term investment. It has a lock-in period of 15 years. But still, you can make partial withdrawal from the 7th year, if there is any need of financial aid. You can manage your PPF account online as well and keep a track of your balance amount.

If your PPF account is with a bank then all you have to do is have access to internet banking facility. All you have to do is simply log into your e-portal and follow the procedures.

In case your account is with a post office, you will have to visit the respective post office branch to have detail of your PPF account.

Interest rate on PPF is calculated on the minimum balance on the account of an individual between 5th to the last day of each month. Hence, if you plan to make any large deposits, then remember to do it before 5th so that you can get higher returns.

Opening a PPF account is very simple, you can approach state-owned and private banks like SBI, Bank of Baroda, PNB, HDFC Bank, ICICI Bank and Axis Bank, etc. You can ask them to open a PPF account.

How much you should invest? 

For instance, if a central government employee invests Rs 500 every month in PPF for next 35 years at an interest rate of 8.10%, then he or she will earn over Rs 12.66 lakh on maturity. Idea is to start as early as possible. 

(Image Source: ICICI Bank calculator)

If the investment is Rs 1000 on the same interest rate and maturity period, then an employee will earn over Rs 25.32 lakh, as per ICICI calculator.

If that investment is increased to Rs 5000 a month with same interest rates and maturity period then a central government employee will receive a whopping Rs 1.27 crore, adds the calculator.

Surely, to your surprise, if that investment is increased to Rs 10,000 a month on same maturity and interest rate, guess what! You sit on pile of nearly Rs 2.54 crore, explains the calculator.

Thereby, one can retire a crorepati if PPF is availed a regular savings tool. It also needs to be noted that, PPFs are far better than fixed deposits made with banks as interest rate is lower in the latter compared to the former. Hence, if you are looking for investment, you might want to have a look at PPF.