PPF is an acronym for Public Provident Fund. It was initially introduced in 1968 with the motive to mobilize small time savings into an investment with a reasonable return along with benefits to save tax. It helps in building a retirement corpus for an individual. With PPF interest rate, it is secured risk management, with compounded returns. The current PPF interest rate is 7.1% and compounded annually. PPF is backed by the Government of India and it offers a guaranteed risk-free return. Additionally, it falls under EEE status, which means the amount invested, the interest earned, and the maturity amount received are tax-free.
PPF also has a minimum tenure of 15 years and can be extended in blocks of five indefinitely. Moreover, the minimum investment of a PPF account is ₹500 and a maximum of ₹1,50,000. It can also be made to a lump sum or in a maximum of 12 installments. The deposit of a PPF account needs to be made a minimum of once a year.
PPF Interest Rate 2021
Here is how the PPF account interest rates have changed in the past ten years to the latest PPF interest rate.
|Financial Year||Time Period||Interest Rate [p.a]|
|2020-2021||April 2020 – June 2020||7.10%|
|2019-2020||January 2020 – March 2020||7.90%|
|2019-2020||October 2019 – December 2019||7.90%|
|2019-2020||July 2019 – September 2019||7.90%|
|2019-2020||April 2019 – June 2019||8.00%|
|2018-2019||January 2019 – March 2019||8.00%|
|2018-2019||October 2018 – December 2018||8.00%|
|2018-2019||July 2018 – September 2018||8.00%|
|2018-2019||April 2018 – June 2018||7.60%|
|2017-2018||January 2018 – March 2018||7.60%|
Essential Features of PPF
- Tenure – It has a minimum tenure of 15 years, which can be extended by a five years block.
- Limit of Investment – PPF allows a minimum of Rs.500 and a maximum of Rs. 15 Lakhs for each financial year.
- The Opening Balance – A PPF account can be opened with Rs. 100.
- Frequency of Deposits – Deposits are to be made at least once a year during the tenure.
- Deposit Mode – Deposits to a PPF account can be made through cash, cheque, Demand Draft, and Online fund transfer.
- Nominee – An account holder can designate a nominee for their account either at the time of opening or subsequently.
- Joint Accounts – The account can be held in the name of one individual only.
- Risk – Since it is backed by the Government, the scheme offers an assured and risk-free return.
Benefits of the PPF Scheme
|Interest Rates||The interest rates on PPF are higher than those offered on account balance and are slightly higher than fixed deposits.|
|Tax Benefits||Section 80C allows a deduction for the principal sum expended up to Rs. 1.5 lakh. The interest gained as well as the maturity value is also tax-free. a For principal, interest, and maturity amounts, which makes the whole fund exempt-exempt-exempt.|
|Government Management||PPF investments are guaranteed and regulated by the Indian government, making them safer than other investment alternatives such as savings accounts, FDs, and ELSS.|
|Fund Benefits||From the third to the sixth year after the account is opened, an investor will take a loan against the PPF account. A creditor may also withdraw a portion of the money starting in the seventh financial year after the account is opened.|
|Nomination||A guardian of a juvenile or mentally ill child may open a PPF account on their behalf. For them, this is a viable choice for securing their future.|
|Future Security||In the case of insolvency, the balance of a PPF account cannot be added to an investor’s liabilities. As a result, this fund should be used as a last resort to guarantee future stability for the lender.|
How is PPF Interest Compounded?
The Provident Fund scheme is a long-term saving along with a tax instrument that has been introduced by the National Savings Institute of the Finance Ministry. It aims at mobilizing small-term savings under investors. As it is under the EEE tax category, it falls under Income Tax. It is a fund that is compounded annually, with interest calculated on a monthly basis which is credited at the end of the year.
The Interest rates are fixed quarterly by the Ministry of Finance, the Government of India. Banks offer a PPF account at the interest rate fixed by the Government of India. The interest on a PPF account is estimated and charged on the balance in the account of the lender. The interest rate on the PPF system is set by the government of India, and the return has been declining in recent years.
How to Open a New PPF Account?
A PPF account can be opened at all designated branches of all the public sector banks and private sector banks. The process of a PPF account is slightly different from opening a savings or FD account. One can check from the vast list of banks providing PPF account opening option.
Documents required to open a PPF account
- PPF application form from the bank.
- ID Proof – can be, PAN card, Aadhaar, Driving License, Voter ID, Passport.
- Address Proof – can be, telephone bill, electricity bill, ration card, Aadhaar.
- 2 passport size photos
- Pay-in-slip or a signed cheque in the favor of a PPF account.
- Age Proof – Birth Certificate
PPF Interest Rate – FAQs
Q1. How do I calculate my Public Provident Fund?
You can account for your savings with an online PPF calculator by entering your yearly investment, time period, and rate of interest.
Q2. How much to invest in PPF?
About the fact that the upper cap for 80c investments is Rs. 1.5 lakhs, you can determine how much you need to spend in PPF and how much you can save in taxes by doing so. The minimum investment is Rs. 500, and the highest investment is Rs. 1,50,000.
Q3. Which Banks provide PPF account facilities?
Most nationalized banks, commercial banks, post offices, and their branches sell PPF accounts, which can be applied both online and offline.
Q4. What is the current rate of interest on PPF?
The rate of interest on PPF in 2021 is 7.1%.