The balance of a PPF, or Public Provident Fund, receives interest depending on the PPF interest rate set by the government every quarter. PPF interest rates are among the finest when compared to other government-backed fixed-income instruments such as National Savings Certificates (NSC), Post Office Time Deposits, and so on. PPF interest rates have always been set higher than the popular Fixed Deposit rates given by banks to encourage long-term savings among Indian consumers. The current interest rate for PPF accounts has been set at 7.1% for Q3 (October-December) FY 2022-23.
Read more PPF: Eligibility, Tax Benefits, Interest Rate, How to Open Online, Withdrawal.
How Have PPF Interest Rates Changed in the Last 5 Years?
The table below depicts the variations in PPF interest rates over the previous few years:
|Period||Interest Rate on PPF|
|October -December 2021||7.1%|
|January -March 2021||7.1%|
|October -December 2020||7.1%|
But, how is PPF interest calculated?
- Every month, the returns on the PPF balance are computed using the current PPF interest rate for the quarter. The whole interest generated in a fiscal year, on the other hand, is credited to the PPF account only after the fiscal year.
- It should be noted that from the 5th to the final day of each month, PPF interest is paid on the lowest balance seen in the PPF account. For example, if your PPF account balance is Rs. 20,000 on April 1st, 2021, and you deposit Rs. 40,000 more on April 8th, 2021, interest will be computed on Rs. 20,000 rather than Rs. 60,000. If you deposit the same amount on April 4, 2021, however, interest will be computed at Rs. 60,000.
- Furthermore, PPF is compounded yearly, which means that the interest earned on your accumulated PPF balance in the previous year is added to your principal amount and so earns interest in the current year.
Annual compounding may be tremendously helpful for a long-term investment. Even at maturity, you have the option to continue contributing to the PPF. As a result of yearly compounding, if you opt to prolong your PPF for another 5 years without making further payments, the additional returns can be considerable.
What Happens to the PPF Account When the Account Holder Dies?
If the PPF account holder dies, the nominees must have the account transferred into their name. It should be emphasized that a nominee cannot contribute to the PPF account. However, if the money is not removed, the account will continue to produce interest even after the owner dies.
The PPF account is transferred to the nominees based on the nomination given by the subscriber in the account opening form. If the account holder has specified a precise portion for each nominee (say, 50%), the account will be handed to them appropriately. Nominees will keep the PPF funds in trust for the deceased’s lawful heirs.
Minors’ PPF Account Interest
PPF accounts can also be formed on behalf of minor children by parents/legal guardians. However, the maximum contribution that may be made (to the account of the child and the adult combined) in a fiscal year is Rs 1.5 lakh.
A father, for example, cannot deposit Rs 1.5 lakh in his account and another 1.5 lakh in his daughter’s account, but he can deposit Rs 90,000 in his PPF account and Rs.60,000 in his child’s account. Minors’ PPF accounts will earn the same rate of interest as adults. It should be noted that nominations for a minor’s PPF account are not permitted.
Is there any interest paid on PPF accounts when they reach maturity?
PPF accounts have a minimum lock-in period of 15 years from the date of account opening. Account holders have two options when their PPF account matures after 15 years:
They have the option of withdrawing the whole amount collected in their PPF account.
They can keep their PPF account open for another five years. This allows people to continue contributing and earning interest on their overall PPF balance. However, the application for extension must be submitted within one year of the PPF account’s maturity date. PPF account extensions are granted in 5-year increments, with no limit on the number of extensions granted. If no action is taken by the PPF account holder within one year of maturity, the account is prolonged as default, generating interest. However, no additional contributions to the PPF account are permitted in this instance.
PPF Interest Rates vs. Other Investment Options
|Investment Instrument||Interest Rate||Lock-in Period|
|Public Provident Fund||7.1%||15 years|
|National Saving Certificate (NSC)||6.8%||5 years|
|Tax Saver Fixed Deposit||3.5-7.5%||5 years|
|Sukanya Samriddhi Yojana||7.6%||21 years from the date of opening of the account or upon the marriage of the account holder, whichever is earlier|
|5 Year Post Office Time Deposit Account||6.7%||5 years|
How to Check a PPF Account’s Current Balance?
- To find out the current status of your PPF account, please contact your bank or post office branch.
- If your bank offers online banking, you can request that your PPF account be linked to your online banking account. You may access your PPF account and conduct basic operations such as viewing or monitoring the PPF account status after the accounts are linked. He or she can also make PPF loan payments online.
The Benefits of Having a PPF?
The following are some of the primary benefits of owning a PPF Account as an Indian citizen:
- If you deposit up to Rs. 1 lakh in their PPF account every year, the amount is deductible under Section 80C of the Income Tax Act. Contributions to an assessee’s spouse’s and/or children’s PPF accounts are likewise tax deductible under Section 80C.
- The money in a PPF account cannot be used to pay off debts or liabilities. The money in a PPF account belongs to the account holder for life and is due to the person’s nominee(s) after his or her death.
Also, read EPF – Employees’ Provident Fund, EPFO Benefits & Process.
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