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 The entire amount can be withdrawn after the maturity period, that is, 15 years.
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
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.
PPF accounts can be opened in the following places:
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.
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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