Log In Sign Up
Pay less tax this year

Save upto Rs. 45,000/- taxes
by investing in ELSS

What is PPF?

Public Provident Fund ( PPF ) was introduced in India in 1968 with the objective to mobilize small saving in the form of an investment, coupled with a return on it. It can also be called a savings-cum-taxsavings investment vehicle that enables one to build a retirement corpus while saving on annual taxes. Therefore, anyone looking for a safe investment option to save taxes and earn guaranteed returns should open a PPF account.

How is PPF interest calculated?

Interest on PPF is compounded annually, in Post office. The formula for this is :
F = P [1+i]^n / i
In this,
F = Maturity Proceeds of PPF
P = Annual Installment
n = Number of years
I = Rate of interest/100

So, if you invest in PPF and put in Rs. 100,000 per year (Beginning of the year) for 15 years, at the interest rate of 7.6%, your total value will be calculated as:
F = 100,000
n = 15
I = 7.6/100
F = Rs. 28,32,193 after 15 years

Benefits of PPF

  • With a deposit period of 15 years and a lock-in period of 7 years, PPF serve effective returns more attractive than bank FDs

  • Tax-free interest and withdrawals and tax-deductible investments

  • There is low risk of default in PPF as it is government-backed

  • PPF accounts can be opened at nationalised, public banks or post offices and select private banks, all of which have wide reach

Tax Benefits of PPF

  • PPF deposits fall under the falls under the Exempt-Exempt-Exempt (EEE) category

  • Amounts deposited in a spouse’s or child’s PPF account also qualify for tax breaks

Alternative Investment Options

Section 80-C provides PPF with EEE benefit (Exempt, Exempt, Exempt). This means that an investment up to Rs. 1.5 lakhs annually, the returns you earn and the corpus when the fund matures are all exempted from taxation. Now what can compare to this? Your answer is ELSS. Though ELSS has the lowest lock-in period, you can opt for this as a long-term investment (< 5 years). The longer you invest, more tax you will save not to mention earn inflation-beating returns.