The PPF rate of interest is applicable and paid on the PPF balance, and the interest rate is fixed every year. The last decade has seen a lot of fluctuations in the PPF rate of interest.
Calculation of The PPF Rate of Interest
The PPF rate of interest is calculated on the minimum balance that is there in an individual’s account from the 5th to the last day of each month. Thus, in case someone wishes to deposit a large amount of money in the PPF account, then a smart way is to deposit the money on or prior to the 5th of a particular month which will allow him to benefit from earning interest on theirPPF account money for the whole month.
PPF Advantages
The PPF account is advantageous for Indian citizens because of many reasons:
- If an individual makes a deposit of Rs.1,00,000 in his PPF account, the sum of money that he has deposited gets deducted under the section 80C of the income tax act. If the contributor makes contributions to his spouse or to his children’s account, then these amounts are also eligible for deduction under the same act
- The exemption of tax is also extended to the amount of interest the individual earns on the PPF account which means that the individual’s full balance amount is exempted from tax. This means that whatever the investor gets on the investment is absolutely tax-free.
- The balance amount in the PPF account is not eligible for any claim in the case of debt or even in the case of a liability. Hence the amount belongs to the investor for his life, and after his death, it is available for his loved ones.
Find Your PPF Rate of Interest
The current interest for a given year which is generally from the 1st of April to the 31st of March of the next year is fixed and same. The interest rate percentage is available online, and it does not change all through the year. However, the existing balance on the PPF is a more significant number, and one needs to check that.
The investor can contact the bank or the post office in order to know the current status of his PPF account. If the bank that he has opened his PPF account with offers an online access, then you can send a request to link your PPF account to the present online banking account. As soon as the accounts get merged the PPF account can be assessed online, and you can view all the basic functions online. You can now check the account status online and also the payment of PPF can now be done online.
EPF and PPF
EPF and PPF are different things, and most people tend to get confused between the two. EPF is meant for the employees whereas the PPF is a personal savings account which can be used by the self-employed as well as employed individuals. The PPF account can be opened even by those who have an EPF account.
The PPF scheme, 1968 was introduced by the Ministry of Finance and is a tax saving initiative. The interest earned on the deposits in the PPF account is not taxable, and the deposits that are made towards the PPF account can be claimed for a tax deduction. The PPF scheme is thus one of the most efficient tax instruments in India, and the scheme was introduced to encourage saving among the Indians and to help them create a retirement corpus.
PPF interest rate saving scheme was launched to encourage people to save across the various income classes, and thus the minimum amount that was required to open and start saving in a PPF account was very minimal and easily affordable. These are tax-free accounts and also easily assessable and safe because it is backed by the government. The PPF scheme is also not very complicated to understand, and this makes it a popular investment avenue for the majority of Indian investors.
The PPF account can be opened in a post office or any nationalized authorized banks and also in some special private banks as well. These accounts are easy to open, and all that you need to do is to fill a required form and submit the required documents and then deposit the minimum pay in the branch or the office that has been authorized to do the same.
The PPF rate of interest is set and is announced by the government of India, and the interest is calculated for a particular financial year according to the PPF rate of interest that was announced the last year. This makes it different from bank FDs where the interest rate holds till the full term of the loan and is not changed in between. The maximum amount that can be deposited is also subject to changes.
It is also important to know that when you have a PPF account you can easily transfer the fund between the bank branches and the post offices and also the funds can be transferred between people.
Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.
