Explained! How to earn maximum interest from your PPF account

By: |
June 29, 2018 4:54 PM

The Public Provident Fund (PPF) is one of the most popular tax-saving plans among salaried people in India. It is a government-run saving and investment instrument for those who are looking for retirement planning.

PPF calculator: Invest early to get maximum interest.

The Public Provident Fund (PPF) is one of the most popular tax-saving plans among salaried people in India. It is a government-run saving and investment instrument for those who are looking for retirement planning. PPF is a 15-year scheme, which can be extended indefinitely in the multiples of five years within one year of maturity. However, people sometimes are clueless about the ways to get the maximum interest from their PPF account and settle for what they get.

How to earn maximum interest?

Subscribers who invest before or on the 5th of every month get the maximum return as compared to those who invest after the fifth of the same month.

Reason?

The interest on the balance in the subscriber’s PPF account is compounded annually and is credited at the end of the year. The maximum a subscriber can deposit to their account is Rs 1.5 lakh every year for 15 years.

Now, let us assume the interest rate applied to investment is 8.7 per cent. It means, by the time a PPF account matures, a subscriber will have Rs 45,04,384. This would be the amount for the investors who deposited the money on or before fifth of every month. However, those who invest after fifth of the month will get Rs 44,73,197 after 15 years. The difference between the two is of Rs 31,187. The difference clearly is not a small amount someone would like to lose. Currently, the rate of return on PPF investment is 7.6 per cent.

Tax benefits by opening PPF account:

PPF enjoys an EEE or ‘exempt, exempt, exempt’ status. It means a PPF account offers subscribers triple exemption benefit — tax-free returns, deduction on deposits and no wealth tax. Also, the interest earned from PPF deposits is tax-free.

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