3 MinsJan 19, 2023
The Public Provident Fund (PPF) is one of the most unique savings products available for consumers today. It is popular for several reasons. It is an extremely secure product and offers guaranteed returns. PPF is completely exempt from
taxes. It falls under the Exempt-Exempt-Exempt (EEE) category.
Your PPF contributions allow a tax deduction of up to ₹ 1.5 lakhs per annum. Funds in your PPF account are compounded annually. Thus, it is beneficial to include PPF in your overall investment and savings portfolio. In this
blog, we explain how you can maximise interest on your PPF contribution.
How to calculate interest on PPF?
The government announces the interest rate on PPF for each financial year annually. The current interest rate on PPF contributions is 7.1%. The balance in your PPF account is compounded annually, but it also earns compound interest every month.
The best way to calculate the interest earned on PPF is to use Axis Bank’s PPF calculator. You need to choose the frequency at which you intend to contribute (monthly, quarterly, half-yearly
or annually) and the amount you wish to contribute.
The PPF calculator will automatically indicate the principal amount to be contributed, the maturity amount and the overall interest earned.
How to earn maximum interest on PPF?
- Contribute by the 5th of every month
The interest is calculated on the minimum balance between the 5th of the month and the last day. Hence, you should contribute by the 5th of every month. If you contribute funds even on the 6th, this amount will not be considered for interest
calculation until the next month.
If it hits your PPF account on the 6th, then it will be calculated between the 6th and the end of the month. This
means your money could be lying in your account without earning any interest for one whole month, or more.
- Contribute up to ₹ 1.5 lakh per annum
You can contribute up to ₹ 1.5 lakh per annum to your PPF account. It is ideal to max out your PPF account every year to make the most of this opportunity.
Suppose you contribute ₹1.5 lakhs per annum for 15 years. Consider
that the rate of interest is 7.1%. The maturity amount after 15 years will be ₹ 40,68,208.
[Also Read: Five Reasons to Open a PPF Account]
- Max out your PPF account by April 5th
You can make any number of contributions in a financial year. It should total an amount of ₹ 1.5 lakhs. To earn maximum interest, you should contribute the entire amount by the 5th of April. Thus, interest will be calculated on this amount
for the next 12 months. This will accelerate the pace of compounding your savings.
You should open up a PPF account, irrespective of whether you already have an employee provident fund account or are self-employed.
You can now open up a Public Provident Fund account via an Axis Bank savings account. It comes with the advantage of mobile and internet banking. This makes it a completely
paperless process. It enables easy online contributions. This paves the way for maximising your returns by never missing a payment and earning compound interest annually.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.