Calculate PPF Interest Rate in India for FY 2020-2021

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.

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.

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.

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:

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.

We will discuss how the interest will be calculated in the case of monthly and lumpsum payment to PPF account:

Monthly payments

Suppose Amit is investing Rs. 10,000 per month to the PPF account. Assuming the interest rate to be 7.9% p. a below is how the interest calculation will be made:

Notice how PPF 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

Continuing the above example, suppose Amit is investing Rs. 1,50,000 as a lump-sum amount in the month of April itself. Below is how interest will be calculated in such a case:

What are the tax-saving benefits of PPF?

PPF 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.

The investors cannot withdraw the amount from PPF before the completion of the lock-in period of 15 years. The entire amount of money in a PPF account 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.

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.
• It helps the investors in maintaining a retirement corpus to ensure financial stability post their retirement. Investors can invest either monthly or lump sum payments towards their investment.
• 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.
• 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 latest PPF interest rate fixed by the Ministry of Finance for the quarter April 2020 to June 2020 of the financial year 2020-2021 is 7.10% per annum. In our PPF Calculator we consider the latest PPF interest rate i.e. 7.10%

PPF interest rate for the quarter 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.

Below table illustrates the difference between PPF and fixed deposit:

Frequently Asked Questions.