Ppf Interest Rate: How to Calculate Returns, Calculator, and Tax Benefits
A public provident fund (PPF) is a long-term investment plan backed by the government. So it is a safe investment option. It is one of the country’s most popular investment schemes and is considered a tax-saving financial tool. PPF plan comes under EEE status, that is, Exempt, Exempt, Exempt status. Whenever you do an investment, it is always significant for you to know the return on your investment. So is the case with PPF investment. To know the interest rate and the return you will get from the PPF investment, there are Public Provident Fund calculators available online that help you calculate your PPF investment return.
Features of Public Provident Fund
The following are the significant features of PPF:
- Interest rate
The interest rate for PPF is not static. The government keeps revising the interest rate every quarter, and the PPF calculator will help to calculate your investment value based on the current rate.
- Tenure
The tenure of the PPF plan is very long, about 15 years. If you wish to extend the period, you can extend it by a block or more of 5 years.
- Deposit amount
The minimum deposition limit is Rs. 500 in a financial year, while the maximum is Rs. 1.5 lakhs for a financial year. The deposition can be done in installments or the whole amount.
- Tax benefit
PPF investment has EEE tax status; it enjoys tax deductions on the interest rate, deposit, and maturity amount.
- Withdrawal before maturity
Premature withdrawals can be done after the completion of 5 years, however, based on the condition.
- Loan against a PPF
It is possible to claim a loan against your PPF investment in the third fiscal post the financial year of opening the account.
Calculation of interest rate of PPF
PPF interest rate is not fixed. It keeps changing with time as its interest rate depends on the rate of the government securities. The government revises the interest rate every quarter. According to the government rules, the interest rate of the PPF account is calculated based on the balance in the account before the fifth day of each month. So whenever you plan to do a PPF investment, it is highly recommended to do it before the fifth day of the month. This will help you to earn the interest on that amount, and if you do an investment after the fifth day of the month, then you fail to earn the interest on that amount for that particular month.
PPF account interest rate is compounded yearly. The formula that is used to calculate the interest rate of a PPF account is given below:
f = p [({( 1 + i ) ^ n} – 1) / i ]
Here,
f stands for maturity proceeds of PPF
p stands for annual installments
n stands for the number of years
i stands for rate of interest / 100
So if you are planning to invest in a PPF account, but before investing, you want to know how much you should invest in the PPF plan or how much return you will get by investing in the PPF account, then you can use the PPF calculator online. Doing the investment calculation manually can lead to specific errors, so using the calculator is the best choice to make smart decisions about your investment.
What is a PPF calculator?
The public provident fund calculator is a useful online financial tool. It helps you to calculate the value of your investment in a PPF account over a specified time period. PPF is a long-term investment plan, its lock-in period is of fifteen years, and it has better returns compared to other investment plans like the fixed deposit. PPF investment is even helpful in reducing your tax liability during your tenure of work life.
When you use a PPF interest rate calculator, the inputs that you need to provide are the amount that you can pay annually for a certain number of years and the number of years for which you are planning to invest. Once you enter these details, the PPF calculator will use the previously mentioned formula, and the value of your PPF investment after a certain number of years will be displayed using the current interest rate, as the interest rate for the PPF account keeps changing.
Thus, the PPF calculator can help you to plan for your retirement. The lock-in period for the PPF plan is 15 years, so the PPF investment can be said to be a wise and disciplined decision for investment to secure your retirement. Suppose you already have a corpus in your mind for your retirement, so, with the help of the PPF interest calculator, you can plan the amount and period of investment. However, you should be aware that the maximum limit for deposition annually is Rs. 1.5 lakhs.
Benefits of PPF account
Doing PPF investment is profitable, as it has many financial benefits. The benefits are mentioned below:
- Public provident fund investment is a low-risk investment and provides guaranteed returns.
- It has certain tax benefits.
- It offers good returns even with minimum investments.
- You can even claim a loan against your PPF account.
- Premature withdrawals are also possible.
Tax benefits
The amount you deposit in the PPF account annually is eligible for tax deductions under section 80C of the Income Tax Act. Anyone can claim for deduction for the same limit.
The maximum deposition limit is rs. 1.5 lakhs, so all your amount can be claimed for deduction under section 80C. Section 80C facilitates the deduction of a maximum of Rs. 1.5 lakhs per year which includes all your investment instruments.
PPF account offers triple tax exemptions. The interest rate that you earn from your PPF account enjoys exemption, and there is no wealth tax applicable on the amount that you deposit. Also, no capital gains tax is applicable to your maturity amount. It is how the PPF account offers you triple tax benefits, and so it is categorized under EEE status.
It can be concluded that PPF is a simple and beneficial investment option, and the public provident fund calculator makes it more accessible.
