Understanding the Public Provident Fund (PPF)
The Public Provident Fund (PPF) is one of the most popular long-term saving schemes in India, backed by the Government. It offers a highly attractive combination of safety, guaranteed returns, and unmatched tax benefits. Our interactive PPF calculator helps you track exactly how your investments will compound over the mandatory 15-year lock-in period.
How is PPF Interest Calculated?
PPF interest is calculated monthly but compounded annually. The interest for a particular month is calculated on the lowest balance in your account between the close of the 5th day and the end of the month. Therefore, to maximize your PPF returns, it is always recommended to deposit your yearly investment before the 5th of April.
Where 'A' is the maturity amount, 'P' is the annual installment, 'i' is the interest rate, and 'n' is the number of years.
Example Calculation
If you maximize your PPF account by investing ₹1,50,000 every year for 15 years at a 7.1% annual interest rate:
- Total Invested: ₹22,50,000
- Wealth Gained (Interest): ₹18,18,209
- Total Maturity Value: ₹40,68,209
Frequently Asked Questions
Is PPF tax-free?
Yes! PPF falls under the coveted "EEE" (Exempt-Exempt-Exempt) category in India. This means your initial investment is tax-deductible under Section 80C, the interest earned every year is tax-free, and the entire maturity amount withdrawn after 15 years is completely exempt from income tax.
Can I withdraw before 15 years?
PPF has a mandatory lock-in period of 15 years. However, partial withdrawals are permitted starting from the 7th financial year for specific emergencies. You can also take a loan against your PPF balance between the 3rd and 6th years at a minimal interest rate.