The interest rate for Public Provident Fund (PPF) scheme is stuck at 7.1% since April 1, 2020. While the Government has revised the interest rates of several small savings schemes in three years, it has kept the PPF interest rate unchanged.

In past, the average PPF interest rate was around 8%. Even as the current interest rate on PPF deposits is low, the guarantees and tax benefits provided in this scheme make it one of the best long-term investing options for investors looking at assured returns and tax savings.

The tax benefits under PPF are unmatched. Not only investment up to Rs 1.5 lakh in PPF qualifies for deduction under Section 80C of the Income Tax Act but the interest earned and the amount withdrawn on maturity are also exempted from taxation.

It is estimated that at the current interest rate of 7.1%, the effective interest for individuals in the 31.3% tax bracket works out to be 10.32%. This is also believed to be one of the reasons why the PPF interest rate has not been increased by the Government while other small savings schemes like SCSS, NSC, SSY and KVP are now offering higher annual returns.

Also Read: PPF interest rate history: When Public Provident Fund deposits earned 12% interest!

As PPF is a long-term investment solution, you may be wondering how much money you can accumulate by making full use of the scheme. Let’s have a look.

The PPF scheme allows a maximum investment of Rs 1.5 lakh per year. The final amount that you can accumulate through this scheme will depend on three factors:

Interest rate: Like all other small savings schemes, the PPF interest rate is also subject to quarterly revision by the Government. So the interest rate of this scheme may go up or down in future.

Investment duration: As the PPF interest is compounded on a yearly basis, the duration of investment determines the final amount. Compounding works like magic in the long term. So if you invest in this scheme for a very long period, the final amount you can get will be very high.

Investment amount: The maturity amount you can withdraw from PPF will also depend on how much you have contributed to the scheme on a yearly basis. Naturally, the maturity amount will be maximum if you invest the maximum amount allowed.

Also Read: PPF Interest Rate for July-September 2023 is out

Having seen the three crucial factors, let’s have a look at how long will it take to get at least Rs 1 crore from PPF.

If investing Rs 1.5 lakh per year: The PPF calculator shows that it will take 25 years to reach Rs 1 crore, assuming 7.1% interest throughout the investment period.

If investing Rs 1 lakh per year: The PPF calculator shows that it will take around 30 years to reach Rs 1 crore by investing Rs 1 lakh per year, assuming 7.1% interest throughout the investment period.

If investing Rs 50,000 per year: The PPF calculator shows that it will take around 39 years to reach Rs 1 crore by investing Rs 50,000 per year, assuming 7.1% throughout the investment period.

Note: PPF account can be extended in blocks of 5 years each after 15 years. Also, if the interest rate is revised upwards in future, you may reach Rs 1 crore much before the years mentioned above.

Disclaimer: The above content is for informational purposes only. While PPF is a safe investment option, you should always consult a professional financial advisor for optimizing your investment journey.