GST 2.0 Explained: Everyday Goods Like Shoes, Clothes, and Essentials to Get Cheaper from September 22

GST 2.0: The Reform That Will Make Everyday Clothes and Shoes Cheaper (And What It Means for You) Everyday goods cheaper under GST 2.0

1. What is GST 2.0?

GST 2.0 is India’s sweeping reform of the Goods and Services Tax system, rolled out in September 2025. It replaces the existing four-slab tax structure with a simpler model based on two main rates—5% and 18%, plus a new 40% “sin and luxury” bracket. The aim? Streamline taxation, boost consumption, and rein in inflation.

Timing matters

These changes take effect from September 22, just in time for the Navratri and festive shopping season—an ideal moment for economic stimulus.

 

2. What’s Getting Cheaper—and Why It Matters

Your day-to-day essentials are about to cost less

A wide array of household items—soap, shampoo, toothpaste, kitchenware, and toothbrushes—move from 18% to the low 5% bracket.

Bread, butter, and more hit the zero GST sweet spot

Staples like UHT milk, paneer, chapati, and parathas are now GST-free. That’s food for thought for budgeting families.

Indulgences get a break too

Chocolate, jams, pastries, namkeen, and dry fruits—previously taxed at up to 18%—are now lumped into the 5% bracket. A treat without the tax pinch.

Shoes, clothes, and school essentials come under tax relief

Footwear and apparel priced up to ₹2,500 see a drop to 5% GST (down from 12%). Notebooks, pencils, maps, and other school supplies also enjoy tax relief.

DIY, home, and farming tools also benefit 

Items like fertilizers, drip irrigation tools, solar cookers, pressure cookers, and mixer-grinders—all fall into the 5% bracket, making farming and household routines more affordable.

More affordable healthcare

Critical items—life-saving drugs, surgical gear, oxygen cylinders—are now either tax-exempt or taxed at 5%, offering healthcare cost relief.

3. The Flip Side: What’s Getting Costlier GST tax changes India

Premium apparel takes a hit
Garments and footwear priced above ₹2,500 per item will now attract 18% GST, up from the old 12%.

Industry groups are worried
The Retailers Association of India (RAI) and Clothing Manufacturers Association of India (CMAI) warn this may hit the aspirational middle class, dampen retail demand, and impact traditional handloom and artisan segments.

Luxury and “sin” goods get a steep tax uplift
A new 40% tax slab is introduced for sin and luxury items like premium vehicles, yachts, and certain high-end consumer goods—designed to raise revenue and curb excess spending.

 

4. Economic Impact: Winners and Losers

Consumers win across the board
Lower tax rates on everything from food to clothing to fertility items could slash household bills by up to 1.1% of inflation, giving consumers some much-needed breathing room.

Exporters and artisans receive a boost
Handicrafts, hand‐embroidered goods, and traditional footwear now taxed at 5% bring optimism to cottage industries, especially ahead of festival season.

Auto, electronics, and appliance sectors on the rise 
Price drops in TVs, small cars, cement, and air conditioners are expected to stimulate festive-season demand and spur industrial growth.

But premium and fashion sectors reel
Global labels like Zara, Levi’s, Nike, and H&M may face lower demand as middle-class consumers pull back due to higher GST.

 

5. Voices from the Market

Industry asks for simplicity
RAI advocates for a flat GST rate across categories, to remove confusion and ease the load on retailers.

Not all economists are convinced
Prudent voices like economist Montek Ahluwalia suggest a single 14% rate might be more effective than multiple slabs, emphasizing simplicity and better revenue outcomes.

 

6. Your Spending, Simplified

Here’s a breakdown of what gets cheaper—and what gets costlier:

Category	Price Range	GST Old → New	Consumer Effect
Daily essentials & toiletries	Most price points	18% → 5%	Cheaper household goods
Staple food & bread (milk, paneer, roti)	Household essentials	5% → 0%	Lower grocery bills
Apparel & footwear ≤ ₹2,500	Budget clothing	12% → 5%	More affordable clothing
School & stationery	Books, maps, pencils	12% → 0%	Cheaper education supplies
Healthcare supplies	Lifesaving items	12/18% → 5% or 0%	Reduced medical costs
Premium garments & accessories	> ₹2,500	12% → 18%	Higher costs for branded goods
Luxury/sin items	High-end goods	28% → 40%	Expensive luxury experience

 

7. What You Can Do: Tips & Takeaways GST council meeting updates

• Smart shopping: Stock up on essentials now while they’re cheaper.
• Budget clothes wisely: Choose apparel under ₹2,500 to avoid tax hikes.
• Support local: Handloom and artisan products are now more competitively priced.
• Watch purchases: Postpone luxury buys—tax increases make them more expensive.

 

Final Word

GST 2.0 is a bold move to make everyday goods affordable and spur demand.
By reducing tax on essentials like food, toiletries, school supplies, and affordable apparel, the reforms provide relief to Indian households. Yet the higher tax on premium goods reflects the government's balancing act—promoting simplicity and spending power while protecting fiscal health through new sin and luxury levies.

Ultimately, this reform rewrites pricing dynamics in India—from kirana stores to high-street fashion. As consumers, retailers, and policymakers adjust, the long-term effectiveness of GST 2.0 will prove whether simplification truly meets sustainability.

 

Frequently Asked Questions (FAQs)

Q1: What is GST 2.0?
GST 2.0 is India’s new Goods and Services Tax reform that simplifies the tax structure into fewer slabs, making essentials like food, shoes, and clothes cheaper.

Q2: From when will the new GST rates apply?
The revised GST rates will come into effect from September 22, 2025, just ahead of the festive season.

Q3: Which goods are getting cheaper under GST 2.0?
Everyday goods like soap, toothpaste, shampoo, footwear below ₹2,500, budget clothing, school supplies, and some food items will now be taxed at 5% or 0%.

Q4: Will premium clothing and footwear also get cheaper?
No, clothes and shoes priced above ₹2,500 will actually become costlier as GST rises from 12% to 18%.

Q5: How does GST 2.0 affect household budgets?
Families can expect relief on daily essentials, groceries, and affordable apparel, which will bring down overall monthly expenses.

Q6: Are luxury goods included in GST 2.0 changes?
Yes. Luxury items and “sin goods” like premium cars, tobacco, and yachts now fall under a new 40% GST slab.

Q7: What does this mean for students and parents?
School essentials like books, notebooks, maps, pencils, and uniforms will get cheaper, easing education costs.

 Conclusion

GST 2.0 is a big relief for the common man in India. By cutting taxes on daily essentials, food, affordable clothing, shoes, school supplies, and household products, it puts more money back in the pockets of families. At the same time, it raises taxes on premium and luxury goods, balancing affordability with revenue needs.

This new GST structure will not only boost consumer demand during the festive season but also support local artisans, weavers, and small businesses by making their products more competitive. While high-end brands may feel the pinch, the broader economy and households stand to benefit.

In short, GST 2.0 is set to make life easier for everyday consumers while reshaping India’s retail and economic landscape.

GST supply meaning Scope of Supply in GST: A Complete Guide to Section 7 of CGST Act

GST Section 7: Understanding the Scope of Supply under GST

       Introduction

The Goods and Services Tax (GST), introduced in July 2017, has changed India’s indirect taxation system by creating a unified, destination-based tax. To understand GST properly, one must know what is considered a “supply” under GST law, because supply is the very foundation on which GST is levied.

This is where Section 7 of the CGST Act, 2017 comes into play. Section 7 defines the Scope of Supply, i.e., what transactions are treated as supply of goods or services and are liable to GST.

In this blog, we’ll break down GST Section 7 in simple words, explore its provisions, examples, exceptions, importance for businesses, and address frequently asked questions.

 

What is Section 7 of the CGST Act?

Section 7 of the Central Goods and Services Tax (CGST) Act, 2017 defines the term “Supply”, which is the taxable event under GST.

In simple terms:

• Supply includes all forms of transactions where goods or services are provided for consideration (payment), in the course of business.
• Some activities are treated as supply even without consideration (like transactions between related parties).
• Certain transactions are considered supply by way of deeming provisions, even if they don’t look like supply in a traditional sense.

Without supply, GST cannot be levied. Hence, Section 7 forms the backbone of GST law.

 

Key Provisions of Section 7

Section 7 has several subsections explaining what is covered under the scope of supply:

1. Section 7(1): Supply Includes

Supply includes all forms of:

1. Sale – Transfer of ownership of goods for a price.
2. Transfer – Giving goods/services to another person (with or without ownership transfer).
3. Barter or Exchange – Goods or services exchanged without money. Example: Trading wheat for rice.
4. License – Allowing someone to use property, goods, or services legally. Example: Software license.
5. Rental – Renting out goods or property.
6. Lease – Granting rights to use goods or property over a period.
7. Disposal – Disposing of business assets, such as selling old machinery.

👉 All of the above qualify as supply when they are for consideration (payment) and in the course of business.

 

2. Section 7(1A): Classification of Goods or Services

The government has the power to decide whether a particular activity is considered as:

• Supply of goods, or
• Supply of services

This classification helps in applying the correct tax rate and compliance rules.

 

3. Section 7(2): Activities Excluded from Supply

Certain activities are not treated as supply under GST. These are mentioned in Schedule III of the CGST Act.

Examples:

• Services by an employee to an employer.
• Sale of land and completed buildings.
• Funeral services.
• Actionable claims (other than lottery, betting, and gambling).

This ensures that only taxable transactions come under GST.

 

4. Section 7(3): Government’s Power

The Government, on the recommendation of the GST Council, may notify specific activities as supply of goods or services.

This allows flexibility to adapt to changing business models and economic needs.

 

Schedule I: Supply Without Consideration

Section 7 also refers to Schedule I of the CGST Act, which covers activities treated as supply even without payment/consideration.

Examples include:

1. Permanent transfer of business assets (like giving machinery for free).
2. Supply between related persons or between distinct persons (e.g., transfer between head office and branch in another state).
3. Supply of goods between principal and agent.
4. Import of services from a related person or from a business outside India (for business purposes).

 

Schedule II: Supply of Goods or Services

Schedule II helps clarify whether a particular activity is to be treated as supply of goods or services.

Examples:

• Renting of immovable property → Supply of services.
• Works contract → Supply of services.
• Transfer of business assets → Supply of goods.

 

Schedule III: Activities Not Treated as Supply

As per Section 7(2), Schedule III specifies activities that are outside GST scope.

Examples:

• Services by an employee to employer (salary).
• Sale of land.
• Sale of completed building.
• Services of MPs, MLAs, Panchayat members, and other constitutional posts.
• Services by courts and tribunals.

 

Examples to Understand Section 7

Let’s simplify Section 7 with some practical examples:

Example 1: Sale of Goods

A shopkeeper sells a mobile phone for ₹20,000. This is a supply of goods, liable to GST.

Example 2: Barter Transaction

A farmer gives 50 kg rice to another farmer in exchange for 30 kg wheat. No money involved, but still considered supply under GST.

Example 3: Employee Salary

An employee receives ₹50,000 per month salary. This is an employment service, which falls under Schedule III and is not taxable under GST.

Example 4: Supply Without Consideration

A company transfers machinery worth ₹5 lakh from its head office in Delhi to its branch in Maharashtra. Even though no payment is made, this is treated as supply under GST.

Example 5: Renting a House

A property owner rents out commercial property for ₹1 lakh/month. This is considered supply of services and attracts GST.

 

Importance of Section 7 for Businesses

1. Defines Tax Liability – Businesses know what transactions are taxable.
2. Avoids Double Taxation – Clarifies whether something is goods or services.
3. Compliance Clarity – Helps businesses issue correct GST invoices.
4. Covers Modern Transactions – Barter, digital services, and free supplies are covered.
5. Prevents Disputes – Provides a structured approach for classification.

 

Challenges in Section 7

While Section 7 is comprehensive, businesses face challenges like:

1. Classification Issues
• Sometimes confusion arises on whether something is goods or services (e.g., software).
2. Free Supplies
• Businesses struggle to determine taxability of free samples or promotional items.
3. Schedule Overlaps
• Differentiating between Schedule II and Schedule III can be confusing.
4. International Services
• Import/export of services creates compliance complexities.

 

Judicial Rulings on Section 7

Courts have interpreted Section 7 in several cases:

• Barter Transactions: Courts confirmed that barter without money still counts as supply.
• Employer-Employee Relationship: Salary and employment contracts are outside GST.
• Free Samples: Some rulings clarified that free samples given for business promotion may not be taxable if covered under Schedule III.

 

Section 7 in Simple Words

To put it simply:

• If you sell, transfer, exchange, rent, lease, or license goods/services → It’s a supply.
• If you provide something free to a related party → it’s a supply.
• If you’re just paying salary or selling land/buildings → it’s not supply.

 

Practical Tips for Businesses

1. Check Schedule I, II, III before classifying transactions.
2. Maintain detailed invoices for all supplies, even barter/exchange.
3. Consult experts for complex cases like works contracts or digital goods.
4. Stay updated with government notifications about reclassification.
5. File returns carefully to avoid penalties due to wrong classification.

 

Benefits of Section 7 for the GST System

• Uniform Definition of supply across India.
• Comprehensive Coverage of traditional and modern transactions.
• Flexibility with government’s power to notify new supplies.
• Transparency for taxpayers and businesses.

 

Conclusion

Section 7 of the CGST Act, 2017 defines the Scope of Supply, making it one of the most important provisions under GST law. It determines what activities are taxable, what is exempt, and how to classify goods and services.

For businesses, understanding Section 7 is crucial for compliance, accurate invoicing, and avoiding penalties. While classification issues may arise, the detailed schedules and judicial guidance help bring clarity.

Overall, Section 7 forms the backbone of GST, ensuring that India’s indirect tax system is fair, transparent, and business-friendly.

 

FAQs on GST Section 7

Q1. What does Section 7 of the CGST Act cover?
It defines the scope of supply, i.e., what transactions are considered as supply of goods or services under GST.

Q2. What is considered supply under GST?
Sale, transfer, barter, exchange, license, rental, lease, or disposal of goods/services in the course of business.

Q3. Is salary taxable under GST?
No, services by an employee to an employer in the course of employment are excluded from supply under Schedule III.

Q4. Is barter considered supply under GST?
Yes, even without money, barter and exchange transactions are considered supply.

Q5. What is Schedule I under Section 7?
Schedule I lists supplies that are taxable even without consideration, such as transfers between related persons.

Q6. What is Schedule II?
Schedule II classifies whether a transaction is supply of goods or services.

Q7. What is Schedule III?
Schedule III lists activities that are not considered supply, such as salary, sale of land, and services of MPs/MLAs.

Q8. Can government decide what is goods or services?
Yes, under Section 7(1A), government can notify classification of specific activities as goods or services.

 

Section 6 of CGST Act GST Section 6 Explained: Cross Empowerment of Central & State Tax Authorities

GST Section 6: Understanding the Mutual Empowerment of Tax Authorities Difference between Central and State GST officers

 Introduction

 When the Goods and Services Tax (GST) was implemented in July 2017, it replaced a complex web of indirect taxes such as VAT, service tax, excise duty, and CST. 

The idea was to simplify India's taxation system and ensure uniformity across the country. However, since GST is a dual taxation system—where both the center and states have the authority to impose and collect taxes—questions began to arise:

• Who will assess the taxpayers? 

• Who has the authority to collect taxes in special cases?

 • Can central and state tax officials work together?

To address such issues, Section 6 of the Central Goods and Services Tax (CGST) Act, 2017 has been introduced. It clearly defines the concept of cross-empowerment between central and state tax authorities.

 

In this blog, we will explain Section 6 of GST in simple words, explore its provisions, real-life examples, challenges, and its importance for businesses.

What is Section 6 of GST?

Section 6 of the CGST Act mentions the provisions related to the powers of the central and state government officials.

• It ensures that there is no duplication of tax assessments and clarifies who has the right to enforce the authority in a specific situation.        

• In simple words:
 

Central tax officials (who are working under the CGST Act) and state tax officials (who are working under the SGST Act) have been empowered to act on behalf of each other.

 • This means that any tax officer can issue notices, conduct assessments, and take action under both the CGST and SGST Acts, provided that the case is not already being handled by the other authority.

This principle is known as cross empowerment under GST. ।

Main provisions of Section 6

• Let's break down the important provisions of Section 6 to make them easier to understand:    

• 1 Powers of central and state authorities (Article 6(1)) 

• Officers appointed under the CGST Act are authorized to act as officers under the SGST/UTGST Act. • Similarly, officers under the SGST/UTGST are authorized to operate under the CGST Act. • This avoids duplication and ensures smooth functioning.

• 2. Prohibition on double action (Section 6(2)

If a specific case has already been assigned to a central officer, then the state officer cannot take that case, and vice versa. • This can help prevent taxpayers from being troubled by multiple processes in the same case by different officers.

            

 3. Terms and Conditions (Section 6(3)

The government may set conditions and restrictions for cross-empowerment. 

 This ensures that there is no abuse of power and maintains clarity between the center and the states.

1.Why is Section 6 important?

Section 6 is extremely important for businesses, taxpayers, and government officials because it: 

Prevents duplication of work, allowing businesses to avoid facing multiple assessments from central and state tax authorities for similar transactions.

Ensures smooth administration, enabling central and state officials to act in place of each other, which guarantees faster resolutions and compliance.

Reduces litigation by clearly defining jurisdiction, which minimizes unnecessary disputes between the center and the state. 6. Facilitates business.

 

Taxpayers do not think about which authority to contact. The single process carried out by one authority is binding. 

Real-Life Examples of Section 6 in Action

Let’s make this clear with practical examples:

Example 1:

A business in Delhi is being audited by the Central GST officer for FY 2023-24. In this case:

The State GST officer cannot initiate another audit for the same period.

 Only one proceeding will be valid, avoiding duplication.

Example 2:

A trader in Karnataka is found guilty of issuing fake invoices. Here:

 Both Central and State officers have the power to investigate.

But once one authority takes charge, the other cannot duplicate the same action.

Example 3:

An e-commerce business is operating across multiple states. A State officer in Maharashtra initiates a tax assessment under SGST Act. Due to cross empowerment:

That officer can also take action under the CGST Act.

This avoids the need for two separate assessments

Benefits of Cross Empowerment under Section 6

 Single Authority, Dual Powers

 Saves time for both taxpayers and authorities.

 Reduces confusion in jurisdiction.

 Improves Efficiency

Tax officers can act swiftly without waiting for coordination between Centre and State.

Better Resource Utilization

 Since officers can act on behalf of each other, workload distribution becomes easier.

 Uniform Implementation of GST

 Ensures that GST laws are applied consistently across India.

Challenges in Section 6

While Section 6 has many benefits, certain challenges exist:

 Jurisdictional Confusion

 Sometimes, businesses face confusion about whether a proceeding is under CGST or SGST.

2.Coordination Issues

If Central and State officers don’t coordinate properly, there could still be duplication of efforts.

3 Limited Awareness

small businesses may not fully understand how cross empowerment works.

 Possible Overlap in Investigations

 In fraud or evasion cases, both authorities may initiate inquiries, leading to disputes.

Section 6 and GST Council Decisions

The GST Council has played an important role in framing rules under Section 6. The Council decided that:

 Taxpayers with a turnover below ₹1.5 crore are generally handled by State tax authorities.

Taxpayers with a turnover above ₹1.5 crore are divided between Central and State authorities in a 90:10 ratio (90% by States, 10% by Centre).

This division ensures that both Central and State authorities have jurisdiction but also avoids overlap.

Section 6 in Simple Words

Think of Section 6 as a mutual agreement between the Centre and States:

 Either a Central officer or a state officer can act in your case.

 But only one authority will proceed at a time.

 Once a case is picked by one authority, the other cannot intervene in the same matter.

Judicial Interpretations of Section 6

Over the years, courts have also explained the importance of Section 6.

Courts have emphasized that dual proceedings are not allowed.

 Once jurisdiction is exercised by one authority, the other must step back.

This ensures that taxpayers are not burdened with multiple litigations.

Impact of Section 6 on Businesses

For businesses, Section 6 has had a significant impact:

Clarity in Tax Proceedings → They know only one authority will act.

Less Compliance Burden → No duplicate audits or investigations.

Better Trust in the GST System → Simplifies the taxpayer-government relationship.

More Transparency → Clear rules on who has jurisdiction.

Practical Tips for Businesses under Section 6

1.Maintain Proper Records

Since either Central or State officers can assess you, always keep your GST records updated.

2.Know Your Jurisdiction

Understand whether your turnover places you under State or Central jurisdiction.

3.Respond Promptly to Notices

If you receive a notice, check whether it is from CGST or SGST officer. Only one proceeding should exist.

4.Consult a Tax Expert

For complex cases, always consult a GST practitioner to avoid compliance issues.

Advantages of Section 6 for the Government

Efficient Use of Manpower: Both Centre and State can handle cases without duplicating efforts.

 Better Revenue Monitoring: Helps plug tax evasion through cooperation.

 Uniform Enforcement: Ensures GST rules are applied consistently nationwide.

Conclusion

Section 6 of the CGST Act is one of the most crucial provisions of the GST framework. It establishes the concept of cross empowerment between Central and State tax officers, ensuring smooth tax administration and preventing duplication of work.

For taxpayers, it provides relief from multiple proceedings, reduces compliance burden, and ensures fairness. For the government, it enables efficient resource utilization and uniform enforcement.

While challenges such as jurisdictional confusion and coordination issues exist, the benefits of Section 6 far outweigh them. It truly reflects the spirit of cooperative federalism, where both Centre and States work together to make GST effective and business friendly.

FAQs on GST Section 6 What is Section 6 of CGST Act in GST

Q1. What is Section 6 of the CGST Act?

Section 6 deals with cross empowerment of Central and State GST officers, allowing them to act on behalf of each other.

Q2. Can both Central and State officers act simultaneously on the same case?

No. Once one authority has taken up a case, the other cannot initiate proceedings on the same matter.

Q3. Why was Section 6 introduced?

It was introduced to prevent duplication of efforts, reduce taxpayer burden, and improve coordination between Centre and States.

Q4. Who handles small taxpayers under GST?

As per GST Council decisions, taxpayers with turnover below ₹1.5 crore are generally handled by State authorities.

Q5. What happens if both Central and State officers issue notices for the same case?

In such cases, judicial interpretation favors that only one proceeding should continue, and duplication is not allowed.

Q6. Does Section 6 apply to fraud and evasion cases?

Yes, both Central and State officers can initiate action, but once one authority takes charge, the other must step back.

Q7. How does Section 6 help businesses?

It ensures that only one authority conducts proceedings, reducing compliance burden and avoiding harassment.

 

 End

PPF 1 crore formula How to create a fund of ₹1 crore using the smart 15 + 5 + 5 strategy with PPF

PPF Tips: Create a fund of ₹1 crore through PPF using the formula 15 + 5 + 5

When it comes to safe and secure investment options in India, the Public Provident Fund (PPF) is one of the most reliable schemes. Supported by the Government of India, PPF not only provides assured returns but also offers tax benefits under Section 80C.

Many investors view PPF merely as a small savings instrument, but with the right strategy and patience, it can help you build a substantial corpus—even as large as ₹1 crore. Long term investment in PPF

In this article, we will explain how you can use the “15 + 5 + 5 formula” to turn your disciplined savings into a retirement fund of ₹1 crore. Let’s break it down step by step.

 

What is PPF and Why Should You Consider It?

The Public Provident Fund (PPF) is a long-term saving and investment scheme introduced by the Government of India in 1968. Its purpose is to encourage individuals to save for their future, which also includes the additional benefit of tax-free returns.

Key features of PPF:

• Tenure: 15 years (extendable in blocks of 5 years)
• Minimum investment: ₹500 per year
• Maximum investment: ₹1.5 lakh per year
• Interest rate: Decided quarterly by the government (currently around 7.1% per annum)
• Tax benefits: EEE (Exempt-Exempt-Exempt) status — investment, interest earned, and maturity amount are all tax-free

Because of its government backing and guaranteed returns, PPF is considered one of the safest long-term wealth-creation tools.

 

The 15 + 5 + 5 Formula Explained

Most people open a PPF account and close it after 15 years, withdrawing the money immediately. While this gives a decent lump sum, it’s not enough to reach ₹1 crore.

The smart approach is to extend the account in blocks of 5 years. That’s where the 15 + 5 + 5 formula comes in:

1. Invest consistently for 15 years → Don’t withdraw the maturity amount.
2. Extend your account for 5 years (first extension) → Continue investing.
3. Extend again for another 5 years (second extension) → Stay invested for the long term.

By following this formula, you allow your savings to compound powerfully over 25 years. This disciplined approach is what helps your PPF corpus grow to ₹1 crore. Safe investment options in India

 

How Much Should You Invest to Reach ₹1 Crore?

Let’s look at some numbers to understand how the formula works.

Case 1: Maximum Investment (₹1.5 lakh per year)

• Investment period: 25 years (15 + 5 + 5)
• Annual investment: ₹1.5 lakh
• Interest rate: 7.1% (approx.)
• Maturity corpus: Around ₹1.03 crore

This shows that if you keep investing the maximum permissible amount every year and extend your account, you can comfortably cross ₹1 crore.

Case 2: Smaller Investment (₹1 lakh per year)

• Investment period: 25 years
• Annual investment: ₹1 lakh
• Corpus at maturity: Around ₹69–72 lakh

Even if you don’t invest the full ₹1.5 lakh, PPF still gives you a very respectable amount.

Case 3: Moderate Investment (₹50,000 per year)

• Investment period: 25 years
• Annual investment: ₹50,000
• Corpus at maturity: Around ₹34–36 lakh

This shows the power of compounding—the longer you stay invested, the bigger your corpus becomes.

 

Why the 15 + 5 + 5 Formula Works So Well

The formula works because of compounding interest. In PPF, interest is calculated yearly and added back to your balance. The longer you stay invested, the more your balance earns interest, creating an exponential growth effect.

For example:

• After 15 years of investing ₹1.5 lakh annually, your balance may be around ₹40–45 lakh.
• If you extend it for 5 more years, it may grow to ₹65–70 lakh.
• With another 5 years, it finally crosses ₹1 crore.

This extra 10 years of compounding makes all the difference.

 

Tips to Maximize Your PPF Returns

If your goal is to reach ₹1 crore, here are some practical tips:

1. Invest at the Start of the Financial Year

The earlier you invest in a year (preferably in April), the more interest you earn for that year. Lump-sum investment at the beginning of the year beats monthly contributions in terms of returns.

2. Always Invest the Maximum (₹1.5 lakh/year)

If you can afford it, invest the full amount every year. This ensures you reach the ₹1 crore milestone without stress.

3. Never Break the Chain

Don’t withdraw prematurely, even if allowed. Every partial withdrawal reduces the compounding effect.

4. Use the Extension Feature

After 15 years, don’t close your account. Always extend it in blocks of 5 years. This is the secret behind the 15 + 5 + 5 formula.

5. Think Long-Term

PPF is not meant for short-term goals. Treat it as your retirement or child’s education fund and allow it to grow silently in the background.

 

PPF vs Other Investment Options How to reach ₹1 crore with PPF

You may wonder why you should stick with PPF for 25 years when there are other investment options available. Let’s compare:

PPF vs Fixed Deposit (FD)

• FD interest: 6–7% (taxable)
• PPF interest: 7.1% (tax-free)
• Winner: PPF (better returns + tax-free maturity)

PPF vs Mutual Funds (Equity)

• Mutual funds: Can give 12–15% but are market-linked and risky
• PPF: Safe and guaranteed returns
• Winner: Depends on your risk appetite. Conservative investors prefer PPF, while aggressive investors may combine both.

PPF vs NPS (National Pension System)

• NPS: Market-linked, but offers additional tax benefits
• PPF: Safer but lower returns
• Winner: For retirement, a mix of PPF and NPS works best.

 

Example Calculation: Step-by-Step Growth

Let’s assume you invest ₹1.5 lakh every year in PPF. Here’s how your money grows:

• After 5 years: ~₹8.6 lakh
• After 10 years: ~₹20.7 lakh
• After 15 years: ~₹40–45 lakh
• After 20 years: ~₹65–70 lakh
• After 25 years: ~₹1.02–1.05 crore

This simple example shows the real magic happens in the last 10 years.

 

Benefits of Reaching ₹1 Crore with PPF

1. Tax-Free Wealth – Unlike other investments, your entire ₹1 crore is tax-free.
2. Retirement Security – It can serve as a pension fund.
3. Safe Investment – Government-backed, zero risk of default.
4. Compounding Advantage – Teaches you discipline and patience.
5. Flexible Extensions – Option to extend further even beyond 25 years.

 

Common Mistakes to Avoid

• Withdrawing too early – This kills the compounding power.
• Not investing full amount – If possible, always invest the maximum.
• Delaying yearly deposit – Late deposits reduce your yearly interest.
• Closing account at 15 years – Big mistake if you want ₹1 crore.

 

SEO-Friendly FAQs 15 + 5 + 5 PPF investment plan

Q1. Can PPF really give ₹1 crore?

Yes, if you invest ₹1.5 lakh every year for 25 years using the 15 + 5 + 5 formula, your PPF account can grow to ₹1 crore.

Q2. What is the maximum duration of a PPF account?

Initially, 15 years. After that, you can extend it in blocks of 5 years indefinitely.

Q3. Is PPF better than mutual funds for wealth creation?

PPF is safer and guaranteed, while mutual funds may offer higher returns but with risks. Conservative investors prefer PPF for stable, long-term growth.

Q4. How much should I invest monthly in PPF to reach ₹1 crore?

If you invest the maximum ₹1.5 lakh annually (around ₹12,500 monthly), you can reach ₹1 crore in 25 years.

Q5. Is the PPF maturity amount taxable?

No, PPF follows the EEE model. The maturity amount, including interest, is completely tax-free.

Q6. Can I extend PPF after 15 years without depositing money?

Yes, you can extend with or without fresh contributions. But if your goal is ₹1 crore, continue depositing.

 

Conclusion PPF 1 crore formula

The Public Provident Fund (PPF) is one of the safest and most reliable ways to build long-term assets. By following the 15 + 5 + 5 formula and investing ₹1.5 lakh every year, you can create a tax-free fund of ₹1 crore in 25 years.

 The key is discipline, patience, and consistency. Start early, invest regularly, avoid early withdrawals, and let compounding work its magic. If you want a sure and stress-free way to secure your future, then PPF should definitely be a part of your financial plan.