Ensuring financial security beyond regular income is crucial, especially for retirement. Passive income through investments like the Public Provident Fund (PPF) in India offers assured returns with minimal risk. PPF matures in 15 years and can be extended indefinitely in 5-year blocks, making it an ideal long-term investment choice.
Importance of a Public Provident Fund (PPF) Account
If you haven’t opened a PPF account yet, here are a few key reasons why you should:
Flexible Investments
You can invest from Rs. 500 to Rs. 1.5 lakh annually in a PPF account, earning interest at the applicable rate. This flexibility suits various income levels, allowing contributions monthly, quarterly, semi-annually, or annually without financial strain.
Helps Achieve Long-Term Financial Goals
Whether it’s buying a house or funding your children’s education, the Public Provident Fund (PPF) supports your long-term financial goals. With a 15-year maturity period, it leverages the power of compounding to grow your savings steadily.
Secure Investment With Guaranteed Returns
PPF provides security and stability with guaranteed returns. As a government-backed scheme, it shields investors from market volatility. The interest rate, set by the Ministry of Finance and reviewed quarterly, ensures steady growth without compromising on safety.
How is Interest on Public Provident Fund (PPF) Calculated?
The PPF interest rate ensures fixed returns on investments, reviewed quarterly by the Ministry of Finance. Despite potential rate fluctuations, all PPF accounts earn interest at the same guaranteed rate. Interest is calculated monthly on the lowest balance from the 5th to the last day, credited annually.
Current and Historical Public Provident Fund (PPF) Interest Rates in India
As mentioned before, PPF interest rates undergo quarterly reviews by the Ministry of Finance, Government of India. For the current quarter ending March 2024, the PPF interest rate stands at 7.1%. Historically, these rates have varied between highs of 12% p.a. and lows of 4.8% p.a. Below is a table depicting the historical changes in PPF interest rates:
| Period | PPF Interest Rate |
| April 2020 – Current (up to March 2024) | 7.1% |
| July 2019 – March 2020 | 7.9% |
| October 2018 – June 2019 | 8% |
| January 2018 – September 2018 | 7.6% |
| July 2017 – December 2017 | 7.8% |
| April 2017 – June 2017 | 7.9% |
| October 2016 – March 2017 | 8.0% |
| April 2016 – September 2016 | 8.1% |
| April 2013 – March 2016 | 8.7% |
| April 2012 – March 2013 | 8.8% |
| 1986 – 14th January 2000 | 12.0% (highest) |
| 1968 – 1970 | 4.8% (lowest) |
Advantages of Having a Public Provident Fund (PPF) Account
Setting up a PPF account is crucial due to its assured returns based on the applicable Public Provident Fund interest rate. Besides, there are additional benefits:
- Tax Benefits: PPF offers tax deductions up to Rs. 1.5 lakh annually under Section 80C. It’s also an Exempt-Exempt-Exempt (EEE) investment, ensuring tax-free interest and maturity amounts regardless of the PPF interest rate.
- Loan Facility: Account holders can avail loans against their PPF balance from the 3rd to the 6th financial year. The PPF loan interest rate can be as low as 1% p.a. plus the applicable PPF interest rate at the time of loan application.
- Partial Withdrawals: While PPF matures in 15 years, partial withdrawals are permitted from the 7th year onwards for specified emergencies.
How to Open a PPF Account?
You can open a PPF account either online or offline, with the same PPF interest rate applicable to all subscribers, regardless of the method or institution.
How to Open a PPF Account Online:
- Log in to your net banking account.
- Navigate to the menu and select “Open a PPF account.”
- Choose the “Self-Account” option and proceed.
- Fill out the application with accurate information.
- Enter the deposit amount for your regular investments.
- Submit the application and authorize it with an OTP sent to your registered mobile number to complete the setup.
How to Open a PPF Account Offline:
- Visit the bank branch or India Post Office in person.
- Obtain a physical PPF application form.
- Fill out the form and submit it with required documents, photographs, and a minimum investment of Rs. 100.
- Once verified, your PPF account will be opened, and you’ll receive a passbook detailing your account balance and other relevant information.
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