Year | Opening Balance | Investment | Interest Earned | Closing Balance |
---|---|---|---|---|
1 | ₹0 | ₹25,000 | ₹1,775 | ₹26,775 |
2 | ₹26,775 | ₹25,000 | ₹3,676 | ₹55,451 |
3 | ₹55,451 | ₹25,000 | ₹5,712 | ₹86,163 |
4 | ₹86,163 | ₹25,000 | ₹7,893 | ₹1,19,056 |
5 | ₹1,19,056 | ₹25,000 | ₹10,228 | ₹1,54,284 |
6 | ₹1,54,284 | ₹25,000 | ₹12,729 | ₹1,92,013 |
7 | ₹1,92,013 | ₹25,000 | ₹15,408 | ₹2,32,421 |
8 | ₹2,32,421 | ₹25,000 | ₹18,277 | ₹2,75,697 |
9 | ₹2,75,697 | ₹25,000 | ₹21,350 | ₹3,22,047 |
10 | ₹3,22,047 | ₹25,000 | ₹24,640 | ₹3,71,687 |
11 | ₹3,71,687 | ₹25,000 | ₹28,165 | ₹4,24,852 |
12 | ₹4,24,852 | ₹25,000 | ₹31,940 | ₹4,81,792 |
13 | ₹4,81,792 | ₹25,000 | ₹35,982 | ₹5,42,774 |
14 | ₹5,42,774 | ₹25,000 | ₹40,312 | ₹6,08,086 |
15 | ₹6,08,086 | ₹25,000 | ₹44,949 | ₹6,78,035 |
Public Provident Fund (PPF) is India’s largest long-term savings system, with a distinct mix of security, return and tax benefits. This comprehensive guide will tell you everything about PPF investments.
Public Provident Fund (PPF) is an government funded long-term savings scheme that enables people to develop a retirement corpus and keep money. Established in 1968, PPF is arguably one of India’s most trusted investment markets and guaranteed yields and absolute capital as the Central Government funds it.
The Public Provident Fund (PPF) operates under a compound interest system governed by the formula A = P(1+r/n)^(nt), where quarterly compounding is applied despite annual declarations. The current 7.1% interest rate (Q2 2023) gets recalculated monthly using the lowest balance between 5th and last day of month. Advanced PPF calculators factor in these variables through dynamic algorithms that adjust for:
Feature | Description |
---|---|
Lock-in Period | 15 years with extension option in blocks of 5 years |
Tax Benefits | EEE (Exempt-Exempt-Exempt) tax status |
Interest Rate | Government-declared rate, compounded annually (currently 7.1% p.a.) |
Investment Limits | Minimum ₹500 to Maximum ₹150,000 per year |
Account Opening | Available at banks, post offices, and online |
PPF offers flexible investment options:
Important operational aspects:
PPF accounts follow strict operational protocols under the PPF Scheme 1968 (amended 2016). Account holders must maintain minimum ₹500 annual deposits, with maximum contributions capped at ₹1.5 lakh across all accounts. The 15-year maturity period extends in 5-year blocks indefinitely, with interest continuing post-maturity until closure. Modern PPF calculators integrate RBI's latest circulars, like the 2022 amendment allowing unlimited partial withdrawals (up to 50% of balance) from 7th year. Banking APIs now enable real-time balance checks through NSDL's CAS system, with auto-sync features updating accrued interest daily.
Facility | Available From | Maximum Limit | Terms |
---|---|---|---|
Loan Facility | 3rd to 6th year | 25% of balance at end of 2nd year | Interest rate: 1% above PPF rate |
Partial Withdrawal | After 7th year | 50% of balance at end of 4th year | One withdrawal per year |
Premature Closure | After 5 years | Full amount | Only in specific circumstances |
Feature | PPF | Bank FD | Mutual Funds |
---|---|---|---|
Safety | Government Backed | Bank Dependent | Market Linked |
Returns | 7.1% (Fixed) | 5-6% (Variable) | 10-12% (Market Dependent) |
Lock-in | 15 Years | Flexible | Varies by Type |
Tax Benefits | EEE | Taxable | Varies by Type |
Best suited for salaried individuals:
Ideal for self-employed or business persons:
For optimizing returns:
No, one could only have one PPF account (even as minor guardian).
The account is inactivated but will be activated at a penalty. 500 deposit you should deposit minimum yearly to keep the account running.
Preschool closure can be accessed only in certain circumstances such as hospital or college, and it can also be done over 5 years.
Interest is measured on the minimum balance between 5th and last day of every month and combined each year.
Section 80C deductions make PPF particularly effective for high-income earners. A ₹1.5 lakh annual investment reduces taxable income by equivalent amount, saving ₹46,800 for those in 31.2% tax bracket. The EEE (Exempt-Exempt-Exempt) status ensures complete tax immunity on maturity proceeds - unlike NPS which taxes 60% of corpus. Sophisticated calculators compare PPF returns against ELSS funds, accounting for LTCG taxes on equities. For ₹15 lakh investment over 15 years, PPF yields ₹40.68 lakh tax-free vs ELSS's ₹55.12 lakh (pre-tax), making PPF 19% more effective post-tax despite lower gross returns.
PPF accounts mandate strict adherence to KYC 2.0 norms with biometric verification for deposits exceeding ₹50,000. The Prevention of Money Laundering Act (PMLA) requires reporting of suspicious transactions above ₹10 lakh annually. Nomination rules under Section 45ZA of Banking Regulation Act require periodic updates - failure to maintain valid nomination converts account to "Unclaimed" after 25 years. Recent amendments mandate PAN submission for interest claims above ₹5,000 annually, with TDS implications for non-compliance. Automated compliance tools now track 23 regulatory parameters and generate audit-ready reports meeting RBI's BASEL III standards.
PPF accounts transferred on death attract zero inheritance tax but require legal heir certificates. The maturity period continues for deceased accounts, with interest accruing until formal transfer. Complex scenarios emerge when minors inherit accounts - guardians must submit notarized affidavits and court orders for withdrawals. Advanced estate planning calculators model PPF transfers across generations, considering the 15-year block extensions. For a ₹50 lakh PPF balance inherited by 35-year-old heir, continued extensions until age 70 could grow corpus to ₹2.1 crore through compound growth.