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How Interest On PPF Balance Is Calculated And Some Tips

The Public Provident Fund (PPF) is one of the ideal investment options for any taxpayer. The interest rates are notified on a quarterly basis. Currently, PPF is fixed at 7.9% for October to December quarter. The interest is calculated on a monthly basis according to PPF rules, but it is credited into the account at the end of the financial year on March 31.

It is important to note that interest becomes payable for that month if the deposit is made before the 5th of that month, as it keeps on getting added to the interest on the sum. This will maximize your interest amount. The entire amount can be withdrawn after the maturity period, that is, 15 years.

How To Calculate PPF Balance?

  1. You can utilize a PPF calculator for calculation of PPF. The calculators are available online and are completely free of charge. You will find various types of PPF calculators like fixed/monthly investment calculator, variable yearly investment calculator, loan calculator, PPF maturity calculator and PPF available withdrawal calculator. Select any calculator according to your investment type. The PPF calculator also helps you to calculate the maturity amount you will receive after completing 15 years.
  2. You can simply discuss the PPF related investment decisions with your banker while opening a PPF account.
  3. It is very important to note the terms and conditions of PPF account withdrawal as it differs from bank to bank. Also, know the period from when you can partially withdraw your money and the lock-in period.

For your information, the basic formula for calculation is

F = P[({(1+i)^n}-1)/i]

Here, F = Maturity proceeds of the PPF

P = Annual instalments

n = Number of years

i = Rate of interest/100

Tax Benefits of PPF

Under Section 80C of the Income Tax Act, PPF is eligible for tax exemption up to Rs 1.5 lakh. The interest gained on the final amount is completely tax-free.

Where to Open?

PPF accounts can be opened in the following places:

  • Selected branches of authorized banks,
  • Selected Post Offices

With Minimum investment amount of?

  • The minimum subscription amount = Rs. 100
  • The minimum investment amount = Rs. 500.

Activation fees = Rs.500 + default fee of Rs.50 for every year.

The maximum limit = Rs.1.50 lakh per year.

Deposits in a PPF account can be made in a maximum of 12 instalments per year or lump sum.

Important Points To Be Noted For Maintaining PPF Account

  • The subscription limit for Public Provident Fund needs to be in integral multiples of 5.
  • The PPF subscribers account will be discontinued if the minimum subscription balance is not maintained in their PPF accounts.
  • The subscribers also have a right to appoint nominee(s) on their PPF accounts who will be eligible to get a whole standing amount in case of subscriber’s death.
  • The PPF subscribers have the option to change their nominations by submitting Form F for declaration of new nominations.
  • The PPF amount can be transferred from one office to another.

PPF Partial Withdrawal

The partial withdrawal facility is also available once the subscribers have completed 5 years from the end of the financial year (FY) in which they had made their initial subscription.

It is also very important to note that only one withdrawal in PPF scheme is allowed in FY. And also a subscriber can withdraw up to 50% of her/his credit balance.

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