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Calculate PPF Interest Rate in India for FY 2020-2021

ppf interest rate
ppf interest rate

PPF Interest Rate

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 Post this lock-in period of 15 years the PPF maturity amount can be withdrawn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 Rate

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 returns history:

Financial YearTime PeriodPPF Interest Rate (per annum)
2020-2021April 2020 – June 20207.1%
2019-2020January 2020 – March 20207.9%
2019-2020October 2019 – December 20197.9%
2019-2020July 2019 – September 20197.9%
2019-2020April 2019 – June 20198.0%
2018-2019January 2019 – March 20198.0%
2018-2019October 2018 – December 20188.0%
2018-2019July 2018 – September 20188.0%
2018-2019April 2018 – June 20187.6%
2017-2018January 2018 – March 20187.6%
2017-2018October 2017 – December 20177.8%
2017-2018July 2017 – September 20177.8%
2017-2018April 2017 – June 20177.9%
2015-2016April 2015 – March 20168.70%
2014-2015April 2014 – March 20158.70%
2013-2014April 2013 – March 20148.70%
2012-2013April 2012 – March 20138.80%
2011-2012April 2011 – November 20118.0%
2011-2012December 2011 – March 20128.60%
2010-2011April 2010 – March 20118.0%
2009-2010April 2009 – March 20108.0%
2008-2009April 2008 – March 20098.0%
2007-2008April 2007 – March 20088.0%
2006-2007April 2006 – March 20078.0%
2005-2006April 2005 – March 20068.0%
2004-2005April 2004 – March 20058.0%

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 investmentBalance 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)
02-04-201910,00010,00010,00065.8365.83
02-05-201920,00020,00020,000131.67131.67
07-06-201920,00030,00020,000131.67197.50
13-07-201930,00040,00030,000197.50263.33
03-08-201950,00050,00050,000329.17329.17
02-09-201960,00060,00060,000395.00395.00
02-10-201970,00070,00070,000460.83460.83
02-11-201980,00080,00080,000526.67526.67
02-12-201990,00090,00090,000592.50592.50
02-01-2020100,000100,000100,000658.33658.33
02-02-2020110,000110,000110,000724.17724.17
02-03-2020120,000120,000120,000790.00790.00
5003.345135.00

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 investmentBalance on the 5th of the monthBalance on the end of the monthMinimum BalanceInterest credited
02-04-2019150,000150,000150,000987.50
02-05-2019150,000150,000987.50
07-06-2019150,000150,000987.50
13-07-2019150,000150,000987.50
03-08-2019150,000150,000987.50
02-09-2019150,000150,000987.50
02-10-2019150,000150,000987.50
02-11-2019150,000150,000987.50
02-12-2019150,000150,000987.50
02-01-2020150,000150,000987.50
02-02-2020150,000150,000987.50
02-03-2020150,000150,000987.50
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. 

The withdrawal made from the account at the time of account closure 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 up to Rs. 1.5 lakhs in a year under section 80C of the Income Tax Act.
  • 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.

What is the latest PPF Interest Rate?

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:

ParticularsPPFFixed Deposit
Period of investmentThe 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 investmentIt offers loan against the PPF investment made only after 3 years of completionOne 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 InterestPPF account interest rate is set up by the Government on a quarterly basis.The rate of interest is set by the bank
Premature WithdrawalSuch 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.

Frequently Asked Questions.

Is interest on PPF taxable?

PPF scheme falls under the EEE (Exempt, Exempt, Exempt) tax category. This means a contribution made towards PPF is allowed as a tax deduction under section 80C of the Income Tax Act and the interest earned thereon is exempt under section 10(11) of the Act.

Why is PPF interest not credited yet?

There is no PPF interest rate calculation date. The interest in your PPF account is calculated every month but is credited at the end of the financial year i.e. 31st March of every financial year. You must check your PPF account balance after this day

What is the best time to invest in PPF?

The interest is calculated on the lowest balance in the PPF account between the 5th day and the end of the month. 
 If an investor deposits an amount before the 5th of each month, the investor will get interest for that month on that deposit. Otherwise, the interest is calculated on the previous balance

Should I invest monthly or yearly in PPF?

Investing in PPF is beneficial if you are investing before the 5th of the month. This investment can be made monthly or lump sum. Investing in a PPF scheme monthly or lump sum depends on the liquidity of funds an investor has. 
 
If you have received a lump sum amount, you can invest in a lump sum in a PPF scheme. Investing month on month brings a discipline within you to save an amount and mobilize it towards investment and a long term goal.

Can I change the PPF amount every year?

Yes, the PPF investment amount can be changed each year by the account holder. The minimum PPF investment still has to be Rs. 500 in order for your account to be active.

How to open a PPF account?

All designated branches of SBI Bank, public sector and private sector banks and post offices provide the facility of PPF account offline as well as through internet banking
 
These banks include Axis Bank, Bank Of India, Central Bank Of India, HDFC Bank, ICICI Bank, Bank Of Baroda, Canara Bank and others. 
 
The documents required are the same i.e PAN Card, driving license, passport. However, the process of the application differs when it comes to internet banking or offline application
 
The documents required to open a PPF account are listed below:
 
PPF account application form, available at the bank branch, online website of banks, Indian Post portal
ID proof i.e. PAN card, Aadhar card, driving license, voter ID, passport
Address proof i.e. telephone bill, electricity bill, ration card copy, Aadhar card
2 passport size photographs
To transfer the amount in PPF account, Pay-in-slip or a signed cheque in favor of the account holder
Age proof in case of minors i.e. birth certificate


Which banks provide a PPF account facility?

PPF account is offered by many nationalized banks, private banks, post offices, and its branches with the facility to apply online as well as offline.
 
Following banks provide PPF account facility

State Bank of India
ICICI Bank
HDFC Bank
Central Bank of India
Bank of India (BOI)
Union Bank of India
Bank of Maharashtra
IDBI Bank
Bank of Baroda (BOB)
Vijaya Bank
Allahabad Bank
Oriental Bank of Commerce(OBC)
Canara Bank
Corporation Bank
Dena Bank
Indian Bank
Axis Bank
Indian Overseas Bank (IOB)
Punjab National Bank (PNB)
United Bank of India
Syndicate Bank
Andhra Bank
UCO Bank

Published on April 2, 2020