How to Calculate Interest on Public Provident Fund (PPF) Balance

How to calculate interest on PPF balance

The Public Provident Fund (PPF) is one in every of the foremost common investment choices. Not solely will it supply tax-savings beneath section 80C of the taxation Act, however, the interest earned thereon and maturity quantity also are exempt from tax.

The charge per unit applicable to PPF investments is reviewed and declared by the govt. quarterly. For the quarter ending March thirty-one, 2020, the charge per unit offered is seven.9 percent each year (compounded yearly).

According to PPF rules, the interest is calculated on a monthly basis however it's attributable to the account at the top of monetary year on March thirty-one. Interest becomes owed for that month if the deposit is created before the fifth of that month.

One will invest a minimum of Rs five hundred and most of Rs one.5 100000 in a very year. Here's however interest is calculated just in case of lump-sum and monthly contributions.

Monthly contributions

Suppose you're investment Rs twelve,500 per month. allow us to assume that the charge per unit for PPF is seven.6 percent and remains constant throughout the year. Here's however your PPF interest is going to be calculated:

Date of Deposite The Balance on 5th of Month (Rs.) The balance on End of month (Rs.) Minimum Balance (Rs.) Interest Credited (Rs.) If a deposit is before 5th, Interest would be (Rs.)
02-Apr-17 12,500 12,500 12,500 79.17 79.17
06-May-17 12,500 25,000 12,500 79.17 158.33
07-Jun-17 25,000 37,500 25,000 158.33 237.50
03-Jul-17 50,000 50,000 50,000 316.67 316.67
03-Aug-17 62,500 62,500 62,500 395.83 395.83
04-Sep-17 75,000 75,000 75,000 475.00 475.00
05-Oct-17 87,500 87,500 87,500 554.17 554.17
07-Nov-17 87,000 1,00,000 87,000 554.17 633.33
07-Dec-17 1,00,000 1,12,500 1,00,000 633.33 712.50
04-Jan-18 1,25,000 1,25,000 1,25,000 791.67 791.67
04-Feb-18 1,37,500 1,37,500 1,37,500 870.83 870.83
04-Mar-18 1,50,000 1,50,000 1,50,000 950.00 950.00
        5858.33 6175.00

The total interest attributable into your account is Rs five,858.33 for that year. Had you been depositing your cash into the PPF account on or before fifth of each month, then you'd have earned Rs 316.67 a lot of within the year.

Lump-sum contribution
On the opposite hand, interest is calculated as follows just in case you create a one-time lumpsum deposit throughout the fiscal:

Date of Deposite Contribution The Balance on 5th of Month (Rs.) The balance on End of month (Rs.) Minimum Balance (Rs.) Interest Credited (Rs.)
02-Apr-17 1,50,000 1,50,000 1,50,000 1,50,000 950.00
06-May-17 - 1,50,000 1,50,000 1,50,000 950.00
07-Jun-17 - 1,50,000 1,50,000 1,50,000 950.00
03-Jul-17 - 1,50,000 1,50,000 1,50,000 950.00
03-Aug-17 - 1,50,000 1,50,000 1,50,000 950.00
04-Sep-17 - 1,50,000 1,50,000 1,50,000 950.00
05-Oct-17 - 1,50,000 1,50,000 1,50,000 950.00
07-Nov-17 - 1,50,000 1,50,000 1,50,000 950.00
07-Dec-17 - 1,50,000 1,50,000 1,50,000 950.00
04-Jan-18 - 1,50,000 1,50,000 1,50,000 950.00
04-Feb-18 - 1,50,000 1,50,000 1,50,000 950.00
04-Mar-18 - 1,50,000 1,50,000 1,50,000 950.00

If the date of deposit just in case of lump-sum contribution had been when fifth of Apr, therein case, you'd haven't earned the interest for the month of Apr. The interest earned therein case would are Rs ten,450.

Watch outs

PPF theme rules 2019 have removed the restrictions on the utmost range of contributions which will be created in a very single twelvemonth. However, the utmost contribution in a very twelvemonth cannot exceed Rs one.5 lakh.

What is the PPF charge per unit for FY 2019-20?

The PPF charge per unit is reviewed and declared by the govt. quarterly. The interest rates for FY 2019-20 ar as follows: April-June, 2019: eight percent; July-September, 2019: 7.9 percent; October-December, 2019: 7.9 percent; and January-March, 2020: 7.9 percent.

How am I able to maximize the advantage of investment in PPF?

To maximise the advantage of investment in PPF, one ought to ideally make a contribution before the fifth of each month just in case of monthly contributions. For lump-sum contributions, the quantity should be invested with before Apr five. this can be as a result of deposits created before the fifth of the month can fetch you full interest for that month.

How is PPF interest because of my account calculated?

The PPF interest quantity because of your account is calculated monthly on the bottom balance at the credit of account from the shut of the fifth day of the month and therefore the finish of the month.

When is interest attributable to my PPF account?

The interest in your PPF account is calculated monthly however is attributable at the top of the year.

When can the interest get attributable to my PPF account if I transfer it?

According to PPF theme, 2019, interest shall be attributable at the top of the year regardless of the modification of the accounting workplace because of the transfer of the account throughout the year.

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