Comprehensive Guide to Public Provident Fund (PPF)
What is a PPF Account?
The Public Provident Fund (PPF) is a popular long-term savings scheme backed by the Government of India. It offers guaranteed, tax-free returns and is widely used for retirement planning and building a risk-free corpus over 15 years.
How PPF Interest is Calculated
PPF interest is compounded annually but calculated monthly. The interest for any given month is calculated on the lowest balance between the 5th and the end of the month. Therefore, it is highly recommended to deposit your money before the 5th of the month to earn interest for that month.
F = P × [({(1+i)n - 1} / i)]
Where:
F = Maturity value of the PPF account
P = Annual installments (if depositing a lumpsum yearly)
n = Number of years (typically 15)
i = Interest rate (Annual Rate / 100)
Frequently Asked Questions (FAQs)
What are the tax benefits of PPF?
PPF falls under the EEE (Exempt-Exempt-Exempt) category. The principal invested (up to ₹1.5 Lakhs) is tax-deductible under Section 80C. The interest earned is tax-free, and the maturity amount is entirely tax-free.
Can I extend my PPF account after 15 years?
Yes. After the initial 15-year maturity, you can extend your PPF account in blocks of 5 years, indefinitely, either with or without further contributions.