PPF Interest Rate

The interest on PPF is based on the minimum balance in an individual’s account between the 5th to the final day of every month. In case the individual wishes to deposit a large amount at any time of the year, he/she should do that on or before the 5th of the particular month. This will allow the individual to earn interest on the amount for the whole month.

• Annual Compounding - PPF has compounded annually which means that the interest received in the past year, in turn, earns interest in the current year. For example, if you have earned 8% (Rs. 8,000) as interest on your PPF balance of Rs. 1,00,000 in the past year then the balance considered for the current year will be Rs. 108,000. Therefore, in the current year, your interest will be 8% of Rs 108,000 which is Rs. 8,640.
• Interest Rate for Minors - PPF accounts can be opened by parents/legal guardians on behalf of minors. However, the maximum limit of Rs. 1,50,000 accounts to the combined accounts of the adult and the minor. For instance, a parent cannot deposit Rs. 1,50,000 in his own account and another Rs. 1,50,000 in his daughter’s account. However, he can deposit Rs. 1,00,000 in his account and Rs 50,000 in his daughter’s account. The rate is the same as the PPF rate for adults. Nomination cannot be made for such minors’ accounts.
• Interest Rate for NRIs - NRIs cannot open PPF accounts. However, a resident Indian who has become an NRI after opening a PPF account can continue the account till maturity. Such an account will earn the same interest rate as that for resident Indians.
• Senior citizens - Senior citizens get the same interest rate on the PPF as younger Indians. They get higher rates on senior citizen-oriented products like SCSS (Senior Citizens Savings Scheme) and Pradhan Mantri Vaya Vandana Yojana (PMVVY).
• Interest at Maturity - The PPF interest on maturity is the weighted average of the interest rates that have been declared in all the years in which the account was operational. For example, if the interest rate at PPF maturity is 8% but the interest rate in previous years was 7%, your final rate would be a weighted average of the two rates.

How to check the current balance of a PPF account?

An individual can check the status of his/her PPF account. This is what can be done to know the status of a PPF account:

• Contact the bank or post office branch to know the current status of the PPF account.
• If the bank provides an online banking facility, one can request the bank to link their PPF account to their respective online banking account. Once the accounts are linked, the individual can access his/her PPF account and perform the basic functions such as viewing or checking the PPF account status. He/she can also make online payments for PPF loans.

Benefits of PPF

• If an individual makes a deposit of up to Rs. 1 lakh per annum in their PPF account, the sum of money is deductible under Section 80C of the Income Tax Act. The contributions made to the PPF accounts of an assessee’s spouse and/or children are also eligible for tax deduction under Section 80C.
• The interest earned on the PPF amount is also exempted from tax. This implies that the returns earned on the investment made in PPF are completely tax-free.
• The amount in a PPF account cannot be claimed to meet cases of debt and/or liability. 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.

Documents Required to Open PPF Account

• PPF account opening form (Form A) can be obtained from specified bank branches or can be downloaded online.
• ID proof
• Address proof
• Photograph of the account holder
• Nomination form

About PPF

Public Provident Fund (PPF) is a preferred investment option since it is backed by the Government of India and comes with an attractive interest rate and guaranteed returns. The interest earned on the PPF account is set for every quarter and is paid by the government. The applicable interest rate on PPF for the first quarter of the year, 2021-22 i.e. from 1st April to 30th June 2021 has been fixed at 7.1%.

The earnings or returns on PPF are entirely exempt from tax under Section 80C of the Income Tax Act. Investors can save tax ranging from Rs. 500 to Rs. 1,50,000 in a given financial year, and can get facilities such as loan, withdrawal, and extension of account.

PPF is considered to be a good investment avenue for self-employed people, or for those who are from unorganized sectors since EPF/GPF may not be available to them.

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