How to Calculate PPF Returns

PPF is a popular and widely-used, long-term investment scheme backed by the Government of India for a period of 15 years. The fund not only provides a lucrative interest rate but also provides tax exemption; both in terms of full tax exemption of returns as well as a deduction under Section 80C of the Income Tax Act. The amount required to be invested by an investor annually ranges from Rs.500/- to Rs.1,50,000/-.

A PPF Return Calculator is the easiest and most effective way to calculate PPF interest and returns. Several PPF Calculators online are available on the website of different non-banking financial companies and banks. The calculation is relatively easy since its features like interest rate, taxation, withdrawal, and maturity rules are determined by the Government of India and cannot be altered.The main details to be inputted while using a PPF Return Calculator are:

PPF Tenure

Minimum 15 years to 50 years, with an option to extend by a further five years;

Payment Frequency

Either monthly, quarterly, semi-annually, or annually;

Deposit Amount

The amount to be deposited as per the frequency. E.g., Rs.1000/- every month;

Interest Rate

The expected rate of return on the PPF or the prevailing PPF rates available online.

PPF calculators’ online display a table of contents, including key data which investors need to be aware of:

Opening Balance

PPF balance at the start of the financial year;

Amount deposited

The balance at the end of the year post the deposits;

Interest Earned

This tool calculates PPF interest based on the balance at year-end. Interest on PPF is compounded annually with the compounding interest formula;

Closing Balance

Balance at the end of the year after including interest earned and additional deposits made year-round;

Maximum Loan

Investors can avail loans on PPF, which is permissible post completion of the 3rdyear till the end of the 6thyear. The maximum amount of loan is equivalent to 25% of the opening balance of the PPF account for the previous year. Post the 6thyear no loans are provided but withdrawals are permitted;

Maximum Withdrawal

Partial withdrawal is permitted from the 6thyear which is equivalent to either 50% of the closing balance of the previous year from which withdrawal is made or 50% at the end of the 4thyear preceding the year in which withdrawal was opted for; whichever is lesser;

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.