Public Provident Fund (PPF) is a long-term investment scheme offering guaranteed returns. Introduced in 1968 by the National Savings Institute under the Ministry of Finance, it allows investors to build a large corpus over time, primarily for retirement. One can easily open an account in the post office to start investing in PPF. PPF has a lock-in of 15 years and falls under the EEE (exempt-exempt-exempt) category, meaning that the deposits, interest earned, and the maturity amount are all tax-exempt.
Key Features of Post Office PPF Scheme
- Who is eligible: Only Indian residents can open this account, either an adult for themselves or by an adult on behalf of a minor.
- Tenure: PPF has a lock-in of 15 years, which can be extended in blocks of 5 years.
- Partial withdrawal: Partial withdrawal is allowed from the 7th year, subject to conditions.
- Interest: As of 01 Jan 2024, the Interest rate on PPF is 7.1% per annum compounded annually. Interest on PPF is subject to quarterly changes as notified by the Ministry of Finance.
- Tax Benefits: Falls under the Exempt-Exempt-Exempt (EEE) category, Contribution of up to 1,50,000 tax-deductible under section 80C of Income Tax. Not only deduction but interest earned, and the maturity amount are all tax-exempt.
- Loan Facility: Investments can be used as security to avail loans. You can take a loan against your PPF balance between the 3rd and 6th year of investment. Interest is charged at 1% above the prevailing PPF interest rate, and the loan must be repaid within 36 months.
- Deposit Limit: The minimum deposit is ₹500 per financial year, while the maximum allowed is ₹1.5 lakh in a financial year.
- Discontinuation of Account: If the account holder fails to deposit the minimum of ₹500 in any financial year after the initial deposit, the PPF account will be considered discontinued. However, it can be revived at any time before maturity by paying a ₹50 penalty and depositing ₹500 for each year of default.
How to Calculate Post Office PPF Returns?
Post office PPF returns can be calculated using the following formula:
Post office PPF returns can be calculated using the following formula:
M = P * (((1 + i)^n - 1) / i) * (1 + i)
Where,
- M = Total maturity value at the end of the investment period
- P = Annual contribution in the PPF account
- i = PPF interest rate
- n = Total number of years until maturity
But don’t worry about the formula, we’ve already built it into our easy-to-use calculator. Just enter a few details and get your results.
Example of How to Calculate Post Office PPF Returns
There are 2 ways to calculate: use the formula described above, or use the PPF calculator. Let’s use both methods one by one.
Assumptions
Mr. Ram wants to invest ₹10,000 for 15 years, and the investment earns an interest rate of 7.1%
- Annual Investment: ₹ 10,000
- Interest Rate: 7.1%
- Investment Period: 15 years
Using formula
M = 10,000 × (((1.071)^15 )- 1) / 0.071) × 1.071
When you solve for this, you will get M equal to ₹2,71,214
Or you can use the PPF calculator and arrive at the following results:
- Total Invested Amount: ₹1,50,000
- Total Earned Interest: ₹1,21,214
- Total Maturity Value: ₹2,71,214
Step-by-Step Guide to Using INDmoney PPF Calculator
Using the INDmoney post office PPF calculator is simple:
1. Open INDmoney Calculator: Access the calculator on your smartphone or computer.
2. Enter Details: Enter the yearly investment amount. For example, ₹10,000 per year and a maturity period, minimum 15 years, which is the lock-in period.
3. Calculate: The calculator will display the total invested amount, total interest earned, and maturity value instantly.
How does Post Office PPF Calculator work?
The PPF Calculator is based on the annuity due formula, which assumes you are investing your money at the beginning of the year. So when you enter the amount invested and time, it runs the calculation in the background and calculates the total invested, interest earned, and maturity amount.
Benefits of Using INDmoney's PPF Calculator
- Accuracy: The PPF calculator calculates your investment and total interest earned at maturity.
- Convenience: You can use the calculator from the comfort of your home or office, without visiting a Post Office.
- Retirement Planning: You can use the calculator to plan for retirement and invest accordingly every month in your PPF account.
- Time-saving: The calculator saves you time and effort by providing instant calculations without complex calculations.
- Fixed Interest Rate: Automatically uses the fixed PPF interest rate, simplifying the input process.
Post Office PPF Interest Rate
The interest is calculated for the calendar month on the lowest balance in the account between the close of the fifth day and the end of the month. The interest rate is calculated monthly but credited and compounded annually at the end of the year.
The Post Office PPF falls under the EEE category, and therefore, the interest rate earned and maturity amount of PPF are also tax-free.