The Public Provident Fund (PPF) is a tax-saving instrument in India, which is introduced by the National Savings Institute, Ministry of Finance, GoI in 1968.
It is important to note is that the PPF interest is calculated on a monthly basis but credited to PPF account on 31st March of every year.
The aim of the scheme is to mobilize small savings by offering an investment with reasonable returns combined with income tax benefits. The scheme is fully guaranteed by the Government of India.
The PPF (Public Provident Fund) is a long term (maturity of 15 years) small savings scheme backed by the Government of India, that provides tax benefits to investors under Section 80C of the Income Tax Act 1961.
Information about PPF Interest Calculation:
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What is PPF?
The PPF (Public Provident Fund) is a long term (maturity of 15 years) small savings scheme backed by the Government of India, that provides tax benefits to investors under Section 80C of the Income Tax Act 1961.
In other words, the Public Provident Fund scheme is an investment with reasonable returns combined with income tax benefits. PPF has a lock-in period of 15 years and can be extended in a block of 5 years. Post this lock-in period of 15 years the PPF maturity amount can be withdrawn.
Features of PPF Account:
The key silent features of Public Provident Fund (PPF) account is as follows:
- The present rate of interest on the subscriptions made to the fund is 7.1 % per annum during the quarter of April to June 2020.
- The minimum deposit amount is 500/- per annum and the maximum deposit amount is Rs. 1,50,000/- per annum, either in a one-time payment or in a recurring deposit.
- The PPF scheme is for 15 years.
- Investment amount up to Rs 1,50,000/- per annum qualifies for Income Tax Rebate under section 80C of IT Act.
- Interest earned on PPF amount is completely tax-free.
- Deposits to PPF account can be made in a lump sum or in 12 installments.
- One deposit with a minimum amount of Rs 500/- is mandatory in each financial year in a PPF scheme.
- Withdrawal from the PPF account is permissible from the 6th financial year.
- The loan facility is also available in the PPF account from the 3rd financial year up to the 5th financial year.
How to check PPF account balance?
PPF account balance can be checked both online and offline. PPF account balance can be checked online only for those investors whose PPF accounts are held with the bank and having internet banking credentials.
For checking the balance offline, you need to visit the bank branch or post office branch and get the PPF passbook updated. The passbook contains, date-wise, details of the investments made, interest credited, and the balance in your account.
You may Calculate the SBI PPF Maturity value by using: SBI PPF Calculator
OR
You may Calculate the Post Office PPF Maturity value by using: Post Office PPF Calculator
OR
You may Calculate the ICICI Bank PPF Maturity value by using: ICICI PPF Calculator
How PPF interest is calculated?
From April 2016, interest rates on Public Provident Fund (PPF) and other small savings instruments are notified on a quarterly basis. For the current April 2020 to June 2020 quarter, it is fixed at 7.1%.
The PPF rate of interest is reviewed by the Ministry of Finance, GoI every quarter and over the past several years the return has been witnessing a downtrend.
The interest on PPF is compounded annually. But what is important to note is that the interest on your PPF account is calculated on a monthly basis but credited to PPF account on 31st March of every year. PPF accounts have a maturity period of 15 years.
Another point to be noted is that deposits in a PPF account can be made in a lump sum or in a maximum of 12 installments per year.
PPF interest calculation on a monthly basis:
1) Interest is calculated on the minimum balance in the PPF account between the 5th and the end of each month.
2) This means if fresh deposits are made before the 5th of each month, you get the interest for that month on that deposit. Otherwise, interest is calculated on the previous balance.
3) So to maximise interest, a PPF subscriber should deposit contributions or lump sums before the 5th of each month. The minimum amount that has to be deposited in a PPF account each year is ₹500 while the maximum limit is that of ₹1.5 lakh.
4) Ideally, if you have the fund, you should deposit ₹1.5 lakh in a lump sum by the 5th of April. This will help you earn interest in your one-time deposit for the entire year.
5) Let us see through an example how much you benefit if you deposit the money in your PPF account before the 5th of the month.
For example, the balance in your PPF account before in the previous financial year was ₹1 lakh. You deposited ₹20,000 before the 5th of April, So the lowest monthly balance (5th April to 30th April) was ₹1,20,000. So for the month of April, you will get an interest of ₹710. (See Chart Below)
PPF balance before financial year – ₹1,00,000 |
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| Month | Contribution | Deposited on | Lowest Monthly Balance (5th to the end of the month) | Interest rate | Monthly interest |
|---|---|---|---|---|---|
| Apr | 20000 | Before 5th | 120000 | 7.1 | 710 |
| May | 0 | 120000 | 7.1 | 710 | |
| June | 0 | 120000 | 7.1 | 710 | |
| July | 0 | 120000 | 7.1 | 710 | |
| Aug | 0 | 120000 | 7.1 | 710 | |
| Sep | 0 | 120000 | 7.1 | 710 | |
| Oct | 0 | 120000 | 7.1 | 710 | |
| Nov | 0 | 120000 | 7.1 | 710 | |
| Dec | 0 | 120000 | 7.1 | 710 | |
| Jan | 0 | 120000 | 7.1 | 710 | |
| Feb | 0 | 120000 | 7.1 | 710 | |
| March | 0 | 150000 | 7.9 | 710 | |
| 8520 | |||||
On the other hand, if you had deposited ₹20,000 after the 5th of April, you would not have got interest on the fresh contribution of that month. The lowest monthly balance (5th April to end of April) was ₹1,00,000. So the monthly interest would be ₹592. (See Chart Below)
So, you can see that If you had deposited the amounted before the 5th of April, you would have earned interest in April ₹710, but if deposited the same amount after the 5th of April, you would have earned interest in April as ₹592.
PPF Interest Rate:
The Ministry of Finance, Government of India announces the rate of interest for PPF account every quarter. The interest rate compounded annually and paid on 31 March every year. Interest is calculated on the lowest balance between the close of the fifth day and the last day of every month.
The current rate of interest on the subscriptions made to the PPF is 7.1 % per annum during the quarter of October to December 2020. The interest rate applicable to the Public Provident Fund is decided by the Ministry of Finance and is liable to change every quarter.
Historical PPF Interest rate:
The following are the quarter-wise historic PPF interest rates for FY 2004-05 to FY 2019-20:
| Financial Year | Time Period | PPF Interest Rate (per annum) |
| 2020-2021 | October 2020 – December 2020 | 7.1% |
| 2020-2021 | July 2020 – September 2020 | 7.1% |
| 2020-2021 | April 2020 – June 2020 | 7.1% |
| 2019-2020 | January 2020 – March 2020 | 7.9% |
| 2019-2020 | October 2019 – December 2019 | 7.9% |
| 2019-2020 | July 2019 – September 2019 | 7.9% |
| 2019-2020 | April 2019 – June 2019 | 8.0% |
| 2018-2019 | January 2019 – March 2019 | 8.0% |
| 2018-2019 | October 2018 – December 2018 | 8.0% |
| 2018-2019 | July 2018 – September 2018 | 8.0% |
| 2018-2019 | April 2018 – June 2018 | 7.6% |
| 2017-2018 | January 2018 – March 2018 | 7.6% |
| 2017-2018 | October 2017 – December 2017 | 7.8% |
| 2017-2018 | July 2017 – September 2017 | 7.8% |
| 2017-2018 | April 2017 – June 2017 | 7.9% |
| 2015-2016 | April 2015 – March 2016 | 8.70% |
| 2014-2015 | April 2014 – March 2015 | 8.70% |
| 2013-2014 | April 2013 – March 2014 | 8.70% |
| 2012-2013 | April 2012 – March 2013 | 8.80% |
| 2011-2012 | April 2011 – November 2011 | 8.0% |
| 2011-2012 | December 2011 – March 2012 | 8.60% |
| 2010-2011 | April 2010 – March 2011 | 8.0% |
| 2009-2010 | April 2009 – March 2010 | 8.0% |
| 2008-2009 | April 2008 – March 2009 | 8.0% |
| 2007-2008 | April 2007 – March 2008 | 8.0% |
| 2006-2007 | April 2006 – March 2007 | 8.0% |
| 2005-2006 | April 2005 – March 2006 | 8.0% |
| 2004-2005 | April 2004 – March 2005 | 8.0% |
What is the Current PPF Interest Rate?
The current rate of interest on the subscriptions made to the PPF is 7.1 % per annum during the quarter of October to December 2020. The interest rate applicable to the Public Provident Fund is decided by the Ministry of Finance and is liable to change every quarter.
FAQs about PPF interest calculation:
Is interest on PPF taxable?
PPF scheme falls under the EEE (Exempt, Exempt, Exempt) tax category. This means a contribution made towards PPF is allowed as a tax deduction under section 80C of the Income Tax Act and the interest earned thereon is exempt under section 10(11) of the Act.
Why is PPF interest not credited yet?
There is no PPF interest rate calculation date. The interest in your PPF account is calculated every month but is credited at the end of the financial year i.e. 31st March of every financial year. You must check your PPF account balance after this day.
Should I invest monthly or yearly in PPF?
This investment can be made monthly or lump sum. Investing in a PPF scheme monthly or lump sum depends on the liquidity of funds an investor has.
What is the best time to invest in PPF?
The PPF interest is calculated on the lowest balance in the PPF account between the 5th day and the end of the month.
If an investor deposits an amount before the 5th of each month, the investor will get interested for that month on that deposit. Otherwise, the PPF rate of interest is calculated on the previous balance.
