Public Provident Fund – PPF Interest Rate 2022-23; Calculation and Latest Rules: Public Provident Fund is a long-term investment option that comes with a sovereign guarantee. Not just generally higher than FD returns, the PPF scheme comes power-packed with several benefits for the common man.
Anyone can start a PPF account with as little as Rs 500 and invest up to Rs 1.5 in the PPF account in a financial year. Whether you are a salaried person, running a small or big business, self-employed, a gig worker, a freelancer or doing any kind of job, you should look at PPF as an instrument that guarantees the safety of your hard-earned investment and gives back a healthy compounded annual returns.
You can use the PPF account to accumulate wealth over the long term. Individuals, who are not covered by Employees Provident Fund (EPF), can also utilise PPF as a long-term retirement planning option.
Read on to find several interesting benefits and features of PPF.
Can you get Rs 1 crore with PPF?
For long-term investors, PPF is a secure option. Not just the tax benefits, you can actually create a corpus of Rs 1 crore or more through PPF.
The current PPF interest rate offered by the Government on PPF is 7.1% compounded annually. Supposing this rate remains the same, a deposit of Rs 1.5 lakh per year would fetch you nearly Rs 40 lakh in 15 years. Investors have the option to extend the PPF account in blocks of 5 years after the completion of 15 years mandatory maturity period.
So, investing Rs 1.5 lakh/year in the PPF account for 20 years would result in a corpus of around Rs 66 lakh. If you continue to invest Rs 1.5 lakh/year for another five years, then your PPF balance will reach approx. Rs 1 crore in 25 years. You can reach this goal faster if the government revises and increases the interest rate during the investment period. (Read more about this PPF calculation here)
PPF Interest Rate 2022
The interest rate on PPF is revised by the Government on a quarterly basis. The current interest rate is 7.1%. The PPF interest rate for the first quarter of 2022 remains unchanged. (Check Details).
In past, PPF deposits have earned higher interest, even up to 12%. (Read about the history of PPF interest rates since 1968)
PPF Maturity, Closing/Withdrawal Rules
PPF account matures after the expiry of 15 years from the end of the financial year in which the account was opened. PPF account holders can extend their account in blocks of 5 years each after maturity.
Premature closing of PPF account before 15 years is generally not advised. However, you can close the PPF account prematurely after the completion of 5 years for specific purposes such as medical treatment, higher education of children etc.
Also Check: Latest NSC Interest Rate and Calculation
From the 7th year, one withdrawal is allowed in a year. However, the maximum withdrawal can be 50% of the balance amount at the end of the fourth year or the immediately preceding year, whichever is lower.
PPF Interest Rate 2022 calculation: How to make the most of PPF?
The interest on PPF deposits is calculated on a monthly basis but credited to the account at the end of the financial year. The interest is calculated between the fifth and last day of a month. So to maximise returns, you should invest in a PPF account on or before the 5th day of a month. Doing this will fetch you interest on the current month’s balance apart from the previous months’ balance.
If you invest a lump sum in a PPF account in a year, then the ideal option for maximum returns would be to make the deposit between April 1 and April 5 of a financial year.
What is very special about PPF?
PPF enjoys legal immunity. The level of guarantee of your money in a PPF account is so much that it cannot be attached to pay off liabilities through a court order.
Where to invest in Public Provident Fund or open PPF account
A Public Provident Fund account can be opened in Post Office and also with a few banks.
Only one PPF account can be opened by a person in his/her name. You can open separate PPF accounts for each member of your family. You can also open separate PPF accounts for each of your dependent children. However, for the tax benefits, the combined contribution by you in these accounts should not be more than Rs 1.5 lakh.
A parent is allowed to open a separate minor PPF account in the name of his/her child in addition to the account in his/her own name.
PPF account opening eligibility
An individual is allowed to open a Public Provident Fund account at any age. You can also open a PPF account in the name of your minor child/children. HUFs are not allowed to open a PPF account. NRIs can have the PPF account provided the account was opened while they were permanent resident Indians.
What if you have two PPF account?
An individual is not allowed to open more than one PPF account in his/her name. In case a person has opened two PPF account then one of them needs to be closed. If the total deposit in both accounts is within the prescribed maximum limit, then they can be merged into one account chosen by the investor. If the amount is more than the prescribed deposit limit of Rs 1.5 lakh in a year, then the excess amount will be refunded to the account holder without any interest.
In case there is any outstanding loan in any of the PPF accounts to be merged, the depositor needs to repay the entire amount along with interest needs to be repaid before the merger of accounts.
As per rules, if a depositor has opened more than one PPF account then the second and subsequent accounts are treated as irregular.
Income Tax benefit on PPF deposit
PPF deposits enjoy tax benefits under Section 80C of the Income-tax Act. The maximum deduction you can claim under this section is Rs 1.5 lakh in a year. It is important to note that there are several other instruments that also enjoy benefits under Section 80C. For tax benefit, the combined deposits under all such instruments should not be more than Rs 1.5 in a financial year. (Check top 10 investment options under Section 80C)
PPF enjoys “exempt-exempt-exempt (EEE)” tax status. Investors don’t need to pay tax on the amount deposited in PPF account (subject to annual ceiling), interest earned and the amount withdrawn on maturity.
PPF Key features
- Sovereign guarantee
- Legal immunity
- No tax on investment, interest and returns
- Loan facility
- Invest as little as Rs 500/year
How much cash you can deposit in PPF
The maximum investment limit in a PPF account per year is Rs 1.5 lakh and the minimum amount required to be deposited is Rs 500. You can deposit money in your PPF account 12 times a year.
According to Sudhakar Sethuraman, Partner Deloitte India, post offices accept cash up to Rs 50,000 per day. He says that a cash deposit of more than Rs 1.5 lakh in the PPF account is currently not being accepted by the PPF system. However, online money transfer to a PPF account is allowed. Some instances have been reported, where banks discourage PPF account holders from depositing cash in PPF account even if the amount is up to Rs 50,000.
PPF loan facility
You can take a loan against PPF account deposits.
On loan against PPF, the interest rate is 1%. However, the PPF account doesn’t earn any interest till the loan is repaid. Experts suggest that you should go for a loan against PPF if a small amount is required for a short period of time.
The amount of loan against PPF deposit cannot be more than 25% of the amount available in the account at the end of the second year immediately preceding the year in which the loan is applied.
The loan against PPF needs to be repaid within three years of sanction.
You can avail of the loan facility in the 4th to 6th year out of the amount standing to the credit in the account between the third financial year to the fifth financial year.
