Public Provident Fund (PPF) stands as one of India's most trusted long-term investment schemes, offering a unique combination of safety, returns, and tax benefits. This government-backed savings instrument has been helping Indians build wealth since 1968.
Smart Investment Strategy with PPF
PPF offers a strategic advantage through compound interest, where your earnings generate additional returns. For example, a monthly investment of ₹12,500 (yearly ₹1,50,000) at 7.1% interest can grow to approximately ₹40,68,209 in 15 years.
Understanding PPF Interest Calculation
PPF interest is calculated on the minimum balance between the 5th and last day of each month. This means deposits made before the 5th of each month earn interest for that month. The formula used is:
F = P [({(1+i) ^n}-1)/i]
Where:
F = Final Amount
P = Annual Investment
i = Interest Rate (as decimal)
n = Number of Years
Frequently Asked Questions
1. Can I have multiple PPF accounts?
No, an individual can have only one PPF account in their name. However, you can open another account on behalf of a minor child.
2. What happens after PPF maturity?
After the 15-year maturity period, you can either withdraw the entire amount or extend the account in blocks of 5 years. During the extension, you can continue making deposits or keep the account active without deposits.
3. How is PPF better than bank fixed deposits?
PPF offers triple tax benefits (EEE - Exempt-Exempt-Exempt), higher interest rates compared to FDs, and government-backed security. Additionally, PPF returns are not subject to market fluctuations.
4. What are the withdrawal rules?
Partial withdrawals are allowed from the 7th financial year onwards. The maximum withdrawal amount is either 50% of the balance at the end of the 4th year or the immediate preceding year, whichever is lower.
Investment Tips
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Invest before the 5th of each month to maximize interest earnings
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Consider maximizing your annual contribution (₹1,50,000) to get the best tax benefits
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Plan your investments in advance to maintain the minimum required balance
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Keep track of your maturity date and plan extensions accordingly