Everyone wants that life after retirement should be spent without any financial worries. But for this, it is very important to do concrete planning at the right time. If you also want to secure your old age financially, then a disciplined investment strategy of just 15 years can provide you a huge corpus of Rs 2 crore. For this, you will have to start a Systematic Investment Plan (SIP) of Rs 12,500 every month in Public Provident Fund (PPF) and Rs 5,000 in equity scheme of mutual fund. The right combination of these two options can completely secure your retirement.
PPF is a great option for tax free returns
Public Provident Fund has always been the first choice for long-term investors. You can deposit a maximum of Rs 1.5 lakh under this scheme in a financial year. This is a very attractive scheme from the tax point of view, because it comes in the ‘Exempt-Exempt-Exempt’ (EEE) category. This simply means that the amount invested, the interest received and the entire amount received on maturity remains out of the ambit of tax. According to famous tax expert Balwant Jain, the maturity amount of PPF is completely tax free. This scheme matures in 15 years. According to the calculation, if you invest Rs 12,500 every month, your total investment in 15 years will be Rs 22,50,000. Interest of Rs 18,18,209 will be earned on this deposited amount. In this way, after completion of 15 years, you will get tax free amount of Rs 40,68,209.
Big benefit of small amount in equity mutual fund
Along with PPF, you will also have to invest in equity schemes of mutual funds. Under this, SIP of Rs 5,000 every month has to be continued for 15 years. Your total investment during this period will be Rs 9,00,000. If 12 percent annual return is estimated in the long term, then after 15 years your amount will increase to Rs 23,79,657. This method of investment helps in taking direct advantage of the market boom.
Take care of long term capital gains tax
It is also important to understand the tax rules on profits from mutual funds. You have to pay Long Term Capital Gains (LTCG) tax on profits made from equity funds. According to the rules, profit above Rs 1.25 lakh in a financial year is taxed at 12.5 percent. In such a situation, tax of approximately Rs 2,97,457 (which can be considered to be around Rs 3 lakh) will be levied on your funds of Rs 23,79,657. After deducting tax, you will get approximately Rs 20,79,657 in your hands.
This is how your goal will be accomplished in 25 years
Now you have Rs 40,68,209 received from PPF and Rs 20,79,657 received from mutual funds (after deducting tax). By mixing both, you get a total amount of Rs 61,47,866. This is the result of 15 years of continuous investment. Now you will have to invest this entire amount back in lump sum in the equity scheme of the mutual fund. Based on an estimated return of 12 per cent per annum, this amount will cross the magical figure of Rs 2 crore in the next 10 years and a few months. This means that you have to actively deposit money from your pocket for only 15 years, whereas in a total period of 25 years, your wonderful retirement fund of Rs 2 crore will be easily created.
Leave a Reply