Calculate PPF Interest Rate in India for FY 2020-2021

PPF Interest Rate 2020-21

The Ministry of Finance sets out the PPF interest rate which is paid off on 31st March. The current PPF interest rate for the April 2020 -June 2020 quarter is 7.1%.

The PPF interest is calculated every month on the lowest balance at the credit of the account balance between the close of the fifth day and the last day of every month.

The interest is calculated every month but is credited to the investor’s account at the end of the year. Ideally, the investor should invest a fixed amount of sum every month before the 5th to fetch the interest for the entire month. In this way, the investor can gain maximum return on the same.

What is PPF?

The Public Provident Fund scheme is a savings-cum-tax-saving instrument. It was introduced in the year 1968 by the National Savings Institute of the Ministry of Finance. The aim of this small savings scheme is to mobilize small savings among the investors.

In other words, Public Provident Fund scheme is an investment with reasonable returns combined with income tax benefits

Besides offering safety and returns, investing in a PPF scheme also offers tax benefits up to 1.5L under section 80C of the Income Tax Act.

In other words, investors can use the PPF scheme as a tool to maintain a corpus for their retirement by putting a fixed amount regularly. PPF has a lock-in period of 15 years and can be extended in a block of 5 years. Post this lock-in period of 15 years the PPF maturity amount can be withdrawn

PPF Account Interest Rates

The PPF account interest is paid on the amount standing in the investor’s account. The PPF interest rate is reviewed by the Government every quarter and over the past several years the return has been witnessing a downtrend.

Below is a table summarizing the PPF interest rate history

PPF interest rate list year wise:

Financial Year	Time Period	PPF Interest Rate (per annum)
2020-2021	April 2020 – June 2020	7.1%
2019-2020	January 2020 – March 2020	7.9%
2019-2020	October 2019 – December 2019	7.9%
2019-2020	July 2019 – September 2019	7.9%
2019-2020	April 2019 – June 2019	8.0%
2018-2019	January 2019 – March 2019	8.0%
2018-2019	October 2018 – December 2018	8.0%
2018-2019	July 2018 – September 2018	8.0%
2018-2019	April 2018 – June 2018	7.6%
2017-2018	January 2018 – March 2018	7.6%
2017-2018	October 2017 – December 2017	7.8%
2017-2018	July 2017 – September 2017	7.8%
2017-2018	April 2017 – June 2017	7.9%
2015-2016	April 2015 – March 2016	8.70%
2014-2015	April 2014 – March 2015	8.70%
2013-2014	April 2013 – March 2014	8.70%
2012-2013	April 2012 – March 2013	8.80%
2011-2012	April 2011 – November 2011	8.0%
2011-2012	December 2011 – March 2012	8.60%
2010-2011	April 2010 – March 2011	8.0%
2009-2010	April 2009 – March 2010	8.0%
2008-2009	April 2008 – March 2009	8.0%
2007-2008	April 2007 – March 2008	8.0%
2006-2007	April 2006 – March 2007	8.0%
2005-2006	April 2005 – March 2006	8.0%
2004-2005	April 2004 – March 2005	8.0%

How is the PPF rate of interest calculated?

As per the PPF rules, PPF interest rate calculation is on a monthly basis on the PPF balance in the investor’s account but is credited only at the end of the financial year on March 31st.

In this paragraph, we will discuss the interest rate calculation method in the case of monthly and lumpsum payment to PPF account:

Monthly payments

For instance Amit is investing in his PPF account. Assuming the PPF interest rate to be 7.9% p. a

Know how the interest calculation will be made with below example

Date of investment	Balance on the 5th of the month (Rs)	Balance on the end of the month (Rs)	Minimum Balance (Rs)	Interest credited (Rs)	Interest credited if the deposit is made before 5th (Rs)
02-04-2019	10,000	10,000	10,000	65.83	65.83
02-05-2019	20,000	20,000	20,000	131.67	131.67
07-06-2019	20,000	30,000	20,000	131.67	197.50
13-07-2019	30,000	40,000	30,000	197.50	263.33
03-08-2019	50,000	50,000	50,000	329.17	329.17
02-09-2019	60,000	60,000	60,000	395.00	395.00
02-10-2019	70,000	70,000	70,000	460.83	460.83
02-11-2019	80,000	80,000	80,000	526.67	526.67
02-12-2019	90,000	90,000	90,000	592.50	592.50
02-01-2020	100,000	100,000	100,000	658.33	658.33
02-02-2020	110,000	110,000	110,000	724.17	724.17
02-03-2020	120,000	120,000	120,000	790.00	790.00
				5003.34	5135.00

Notice how PPF account interest calculation is done in the highlighted rows in the above table. Essentially, you are losing on the interest if you are making a delay in payment which leads to an overall reduction in the interest earned.

Lump sum payments

For instance Amit is investing as a lump-sum amount in the month of April itself.

The below table is the interest rate calculation method in such a case:

Date of investment	Balance on the 5th of the month	Balance on the end of the month	Minimum Balance	Interest credited
02-04-2019	150,000	150,000	150,000	987.50
02-05-2019		150,000	150,000	987.50
07-06-2019		150,000	150,000	987.50
13-07-2019		150,000	150,000	987.50
03-08-2019		150,000	150,000	987.50
02-09-2019		150,000	150,000	987.50
02-10-2019		150,000	150,000	987.50
02-11-2019		150,000	150,000	987.50
02-12-2019		150,000	150,000	987.50
02-01-2020		150,000	150,000	987.50
02-02-2020		150,000	150,000	987.50
02-03-2020		150,000	150,000	987.50
				11,850.00

What are the tax-saving benefits of PPF?

PPF savings scheme operates on an Exempt-Exempt-Exempt (EEE) model wherein all the investments made towards PPF are deductible under section 80C of the Income Tax Act. You can claim the deductions while filing your income tax return.

The withdrawal made from the account at the time of closure of PPF account is also exempt along with the accumulated interest. You can use Scripbox’s income tax calculator to calculate the taxable income and  tax payable

The investors cannot withdraw the amount from PPF before the completion of the lock-in period of 15 years. The entire PPF maturity amount belongs to the account holder for life and is payable to the nominee(s) of the person after his/ her death

How to check your PPF account balance?

Checking your PPF account balance can be done both online and offline. PPF account balance can be checked online only for those investors whose PPF accounts are held with the bank. All you need is your internet banking to be activated and you can check the status and balance your PPF account at any time.

For checking the balance offline, you need to visit the bank branch and get the PPF passbook updated. The passbook contains, date-wise, details of the investments made, interest credited, and the balance in your account.

Above all to make the customer experience easy, many banks have started to provide kiosks in their branches or ATMs wherein you can update your passbook at your convenience.

Advantages of PPF Account

Below are a few advantages of a PPF account:

• Investment in PPF enables the investors to claim a tax exemption while filing your income tax return. The exemption is up to Rs. 1.5 lakhs in a year under section 80C of the Income Tax Act. 
• The withdrawal of maturity amount at the time of closure of PPF account is tax exempt
• This small savings scheme helps the investors in maintaining a retirement corpus to ensure financial stability post their retirement. Moreover, investors can invest either monthly or lump sum payments towards their investment.
• Additionally, in case of financially difficult times, a loan can be taken against your balance standing in your PPF account. However, this facility is available only from the 3rd year to 6th year from investment.
• Above all PPF accounts can be extended after the completion of 15 years in a block period of 5 years.
•  The premature closure is allowed after completion of 5 years for medical treatment of family members and for higher education. However, the Premature closure of PPF account comes with a penalty of 1%.

Document required to open a PPF Account

To open a PPF account, you need submit document like PAN Card, Aadhar Card, etc. The details are mentioned below :

• Identity Proof- Voter ID, PAN Card, Aadhar Card
• Proof of Residence
• Passport size photograph
• Nomination Form

What is the latest PPF Interest Rate 2020?

The current PPF account interest rate fixed by the Ministry of Finance for the quarter April 2020 to June 2020 of the financial year 2020-21 is 7.10% per annum. However, in our PPF Calculator, we consider the latest PPF interest rate i.e. 7.10%

PPF interest rate for the quarter of April 2020 to June 2020 was 7.10%.

Which is a better PPF or Fixed Deposit?

This question usually comes up in the investor’s mind while making the investment. Even though both are relatively safe investments, people always wonder which one would be better for their purpose.

The table illustrates the difference between PPF and fixed deposit:

Particulars	PPF	Fixed Deposit
Period of investment	The maximum period of PPF investment is 15 years. It does not provide any other investment period.	The bank FD provides flexible investment periods. The investors can make an investment for as low as 60 days.
Loan against investment	It offers loan against the PPF investment made only after 3 years of completion	One can get a loan against fixed deposit as per their needs. However, different bank FD have different rates of interest and repayment periods.
Rate of Interest	PPF account interest rate is set up by the Government on a quarterly basis.	The rate of interest is set by the bank
Premature Withdrawal	Such withdrawals are allowed only after the 5th year and to a limited extent.	Premature withdrawal is allowed subject to a small fee charged by the bank.