Public Provident Fund (PPF) Calculator
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What is a PPF?
- Public Provident Fund (PPF) is a long-term investment scheme mandated by the government of India.
- Since it is backed by the government of India, it guarantees a low risk and a stable return.
- Investment in a PPF scheme can start for as low as Rs.500 annually to a maximum of Rs.1.5 Lakh annually. Investor is eligible to make deposits in 1 to 12 yearly installments.
- PPF scheme has a lock-in period of 15 years. Upon maturity, Investors have an option to extend this scheme by a lock-in period of 5 years.
- Investments made under this scheme are completely exempted from wealth tax.
How is interest in PPF calculated?
As per revised interest rate (April 2020) on PPF, a compound interest of 7.1% is applicable on total account balance before 5th day of each month.
For deposits made after 5th day of the month, interest earned will remain same as of previous month.
For maximum benefit of this scheme, it is recommended to deposit complete annual amount at the start of financial year i.e. before 5th of April each year.
PPF calculation formula:
A= P x [(1+ r)^t / r] x (1+r)
A= Maturity amount.
P= Principal amount.
r= Rate of Interest.
t= Tenure in years.
Let’s consider an example to understand this better,
You are investing a principal amount of 10000 annually for PPF scheme at current interest rate of 7.1%.
A= 10000 x [(1+ 0.071)^15 / 0.071] x (1+0.071)
Maturity amount in this case at the end of lock-in period of 15 years will be 271,213.95.
Any Indian resident can open a Public Provident Fund (PPF) account.
NRI’s are not eligible for PPF account.
Opening of multiple PPF accounts is not allowed.
A guardian is required to open a PPF account for a Minor. Parents can act as guardians for minor’s PPF accounts.
Senior citizens can open a PPF account. There is no fixed age limit for PPF account opening.
How to open a Public Provident Fund (PPF) account:
It can be opened at post office, nationalized banks and Private banks
You can also apply for PPF online via net banking for some major banks.
A passbook similar to a bank passbook is issued once the account is activated (Only some banks provide this service)
Form A- Can be obtained online or by visiting a bank.
Address Proof- Passport, Telephone bill, Electricity bill, Bank Statement with Cheque, Certificate/ ID card issued by Post office
ID proof- Driving licence, Passport, Government ID card, PAN card, Photo ration card, Senior citizen ID card, Voter ID card
Photograph of the account holder.
Advantages of PPF:
Tax Benefits- Any investment made under the amount of Rs.1,50,000/- is eligible for tax exemption.
Loans can be applied against PPF balance. 1st loan can be availed after 3 years. Loan can be availed up to 25% of the PPF balance.
Higher Interest rates- Higher Interest can be earned as compared to savings account and fixed deposit account. The interest rates are compounded annually.
Can withdraw partial amount- Partial amount from the balance can be withdrawn after the 7 years of account tenure. For example if the account was opened on 1st April 2020, the amount can be withdrawn after 1st April 2027. 50% of the amount can be withdrawn from the balance.
Early closure of PPF accounts is permitted after completion of 5 years for specific reasons.
Disadvantages of PPF:
Any amount deposited in excess of ₹1.5 lacs in a financial year won’t earn any interest.
Joint Account is not allowed in PPF.
PPF limit is capped to Rs.1,50,000/-
Liquidity- You cannot withdraw money from your account before the tenure of 7 years.
From last few years it has been observed that the interest rates are reducing.
The account gets inactive if the investment is not made in the entire year. It can be reactivated by paying a fine of Rs.50/-
Transfer of PPF account:
A Public Provident Fund account can be transferred from Banks to the post office or vice versa.
A transfer application request has to be filled and submitted to the bank / post office to complete the transfer.
Loan against PPF:
Public Provident Fund has an option of availing loan against the invested amount.
An investor is eligible for a loan from the beginning of 3rd year till the end of 6th year from the date of account activation.
Loan amount on PPF is restricted to a maximum of 25% of total available amount at the time of application.
The maximum duration for a loan against PPF is 36 months.
Nominee for PPF account:
Ideally when we open a PPF account we do not find an option to fill nominee details.
A separate form (Form -E) has to be filled to add a nominee to your PPF account.
Form-E can be found online or by visiting a bank.
Restoration of an inactive account:
A written request has to be submitted by the account holder.
Amount of Rs.500/- have to be paid for the inactive years (Duration/Years the amount was not deposited/invested)
A fine of Rs.50/- would be charged for each inactive year.
Eligibility for early closure of PPF account:
The account can be closed after 5 years.
It can be closed only for specific causes / reasons.
The account can be closed for medical emergencies of family members or higher education of the account holder.
Interest penalty of 1% is charged in case of early closure.
List of banks offering Public Provident Fund account:
United Bank of India
Union Bank of India
Bank of Maharashtra
Punjab National Bank
Oriental Bank of Commerce
Bank of India
Central Bank of India
State Bank of India
Bank of Baroda
Indian Overseas Bank