PPF Calculator

What is PPF?

Public Provident Fund (PPF), introduced in India in 1968 with the objective to mobilize small savings in the form of an investment, coupled with a return on it. It still remains a favourite savings avenue for many investors as the returns are tax free.It can also be called a savings-cum-tax savings 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.

The Government of India will pay the employer and employee contribution to EPF account of employees for another three months from June to August 2020. The benefit is for establishments with up to 100 employees and where 90% of those employees draw a salary of less than Rs 15,000 per month. The contribution to EPF is reduced to 10% from 12% for non-government organisations.

Benefits of PPF

1. The risk factor in PPF investment is low as it is backed by the government.

2. A PPF account can be opened at nationalised banks, public banks, post offices and selective private banks, all of which have a wide reach.

3. Although the lock in period is 15 years for a PPF, there are provisions to either withdraw some money or take loans after 7 years. The returns from a PPF is more attractive compared to the bank FDs.

4. PPF deposits fall under EEE (exempt-exempt-exempt) category. Which means, the principal invested, the interest earned and the proceeds received at maturity are all tax exempt. Amounts deposited in spouse’s or child’s PPF account are also tax exempt.

How is PPF interest calculated?

The interest on PPF is compounded annually. The formula for this is: F = P[({(1+i)^n}-1)/i]

Here, F = Maturity proceeds of the PPF P = Annual installments n = Number of years i = Rate of interest/100

For example, if you make annual payments of Rs.1,00,000 towards your PPF investment for 15 years at 7.1%, your maturity proceeds at the end of 15 years would be Rs.25,32,343.

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.