PPF Interest Rate 2022- All You Need to Know

Public Provident Fund (PPF) is a government-initiated tax-saving investment option used by the citizens of India. PPF was introduced in 1986 by the National Savings Institute of the Ministry of Finance to initiate savings in form of investment along with the benefit of return on it. Public Provident Fund can also be called a savings cum tax saving investment instrument, which enables an individual to create a financial cushion in the long-term while saving on annual taxes.

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Any individuals who are resident citizens of India are completely eligible to have an account opened in their name under this scheme and can enjoy the benefits of tax-free returns.

PPF Interest Rate

As of now the current PPF interest rate for July- September 2021 is 7.10% which is compounded annually. Before this, the interest rate was the same at 7.10% for July - September 2020. The PPF interest rate is set every year by the ministry of finance and is paid each year on 31st March. The PPF interest is calculated by the lowest balance between the end of the fifth and the last day of every month.

In the below-mentioned table, one can find the history of Public Provident Fund interest rates since 2016. Let’s take a look at the interest rates on PPF in the past years.

Financial Year Interest Rate (per annum)
1 July 2021- 30 September 2021 7.10%
1 April 2021 - July 2021 7.10%
1 January 2021 - 31 March 2021 7.10%
1 October 2020 – 31 December 2020 7.10%
1 July 2020 - 30 September 2020 7.10%
1 April 2020 - 30 June 2020 7.10%
1 January 2020 - 31 March 2020 7.90%
1 October 2019 - 31 December 2019 7.90%
1 July 2019 - 30 September 2019 7.90%
1 April 2019 - 30 June 2019 8.00%
1 January 2019 - 31 March 2019 8.00%
1 October 2018 - 31 December 2018 8.00%
1 July 2018 - 30 September 2018 7.60%
1 April 2018 - 30 June 2018 7.60%
1 January 2018 - 31 March 2018 7.60%
1 October 2017 - 26 December 2017 7.80%
1 July 2017 - 30 September 2017 7.80%
1 April 2017 - 30 June 2017 7.90%
1 January 2017 - 31 March 2017 8.00%
1 October 2016 - 31 December 2016 8.00%
1 July 2016 - 30 September 2016 8.10%
1 April 2016 - 30 June 2016 8.10%
1 April 2015 - 31 March 2016 8.70%

Benefits of PPF as a Tax Saving Instrument

A PPF is such a scheme that falls under the EEE category or Exempt-Exempt-Exempt category. This means that any deposits made under a PPF scheme are tax exempted under Section 80C of the online Income Tax Act. Also, the entire accumulated amount including the PPF interest rate is completely tax exempted at the time of withdrawal. Under PPF, one can avail of the tax exemption under Section 80C of the Income Tax Act up to the maximum limit of Rs.1.5 lakhs. This means that all deposits made to your PPF account can be considered tax-exempt under the same section of the same act.

A PPF account cannot be closed before the completion of its maturity period just like a fixed bank account even though the amount can be transferred between different designated accounts but can never be closed before the completion of the tenure. A PPF account can only be closed prematurely in the event of the death or demise of the account holder. Then in such a situation, the nominee mentioned in the file of the account holder can choose whether or not to close the PPF prematurely or let it reach its maturity period. 

How to Calculate PPF Interest Rate?

A PPF account holder can calculate the PPF interest rate on the least balance in the account between the 5th to the last day of each month. That’s why in case one wants to deposit a larger sum for any period of the year, one should ensure that they invest on or before the 5th of a certain month so that they can get the benefit of interest on the whole month.

PPF Calculation Formula

The following formula is used to calculate PPF account amount:

FV = P [({(1 + i ) ^n} – 1) / i ]

Here is the elaboration:

FV = Future Value (The amount to be received after maturity)

P = Annual installments by the investor

i = The rate of interest periodically

n = Total number of years

Let us understand the formula with an illustration:

For example, Mr. X deposits Rs.1,10,000 annually into his PPF account and avail a loan on the same. The interest rate is taken at 7.90% (the current rate of interest being 7.10%)

Years Opening Balance Amount Deposited Interest Earned Closing Balance Loan Availed Withdrawal
1 Rs. 0 Rs. 1,10,000 Rs. 8,690 Rs. 1,18,690 Rs. 0 Rs. 0
2 Rs. 1,18,690 Rs. 1,10,000 Rs. 18,067 Rs. 2,46,757 Rs. 0 Rs. 0
3 Rs. 2,46,757 Rs. 1,10,000 Rs. 28,184 Rs. 3,84,941 Rs. 29,673 Rs. 0
4 Rs. 3,84,941 Rs. 1,10,000 Rs. 39,100 Rs. 5,34,041 Rs. 61,689 Rs. 0
5 Rs. 5,34,041 Rs. 1,10,000 Rs. 50,879 Rs. 6,94,920 Rs. 96,235 Rs. 0
6 Rs. 6,94,920 Rs. 1,10,000 Rs. 63,589 Rs. 8,68,509 Rs. 133,510 Rs. 0
7 Rs. 8,68,509 Rs. 1,10,000 Rs. 77,302 Rs. 10,55,811 Rs. 0 Rs. 1,92,471
8 Rs. 10,55,811 Rs. 1,10,000 Rs. 92,099 Rs. 12,57,910 Rs. 0 Rs. 2,67,021
9 Rs. 12,57,910 Rs. 1,10,000 Rs. 1,08,065 Rs. 14,75,975 Rs. 0 Rs. 3,47,460
10 Rs. 14,75,975 Rs. 1,10,000 Rs. 1,25,292 Rs. 17,11,267 Rs. 0 Rs. 4,34,255
11 Rs. 17,11,267 Rs. 1,10,000 Rs. 1,43,880 Rs. 19,65,147 Rs. 0 Rs. 5,27,906
12 Rs. 19,65,147 Rs. 1,10,000 Rs. 1,63,937 Rs. 22,39,084 Rs. 0 Rs. 6,28,955
13 Rs. 22,39,084 Rs. 1,10,000 Rs. 1,85,578 Rs. 25,34,662 Rs. 0 Rs. 7,37,988
14 Rs. 25,34,662 Rs. 1,10,000 Rs. 2,08,928 Rs. 28,53,590 Rs. 0 Rs. 8,55,634
15 Rs. 28,53,590 Rs. 1,10,000 Rs. 2,34,124 Rs. 31,97,714 Rs. 0 Rs. 9,82,574

How to Check PPF Account Balance?

To check the current balance, follow these simple steps mentioned below:

  1. Offline Method

    For the offline method of checking the PPF account balance, one can visit the nearest bank branch office or post office and know the current status of the account.

  2. Online Method

    The online method is successful if the bank in which you have an account provides an online banking facility. Your existing account can then be linked to your PPF account and all the normal transactions can be then run smoothly like checking the existing balance, online payments for loans, etc.

Advantages of PPF Account

Here are a few key advantages of having a PPF account:

  • If one deposits up to Rs.1 lakh per annum in the PPF Account, then the invested amount is liable to be exempted under Section 80C of the Income Tax Act. The contributions one makes towards the PPF account of their spouse or children also qualify for tax exemption under Section 80C of the Income Tax Act, 1961.
  • The deduction on tax is also massive up to the interest generated on the PPF account which means the full balance of your PPF account is exempted from the tax, irrespective of the PPF interest rate. This means that you do not have to pay any tax for return on investment in your PPF.
  • With the help of PPF, an individual can create a retirement corpus for the future and ensure to have a financially secured life after retirement.

To Conclude!

One should not get confused between Public Provident Fund (PPF) and Employees Provident Fund (EPF). The PPF and EPF are two different things. PPF is personal savings account for an individual whose income has not been acquainted via a company or an organization or anyone self-employed. Anyone already owning an EPF account can also open this savings investment account. Remember, the PPF interest rate is variable and so does the maturity amount.

FAQ's

  • Q. 1 Is the loan facility available through PPF?

    Ans: Yes, a loan can be availed through PPF. The time duration of availing of the loan though is only from the 3rd financial year till the 6th financial year.
  • Q. 2 Is Income Tax applicable on the interest earned through PPF?

    Ans: No, interest is fully exempted from taxation under Section 10(C) of the Income Tax Act, 1961.
  • Q. 3 Can I withdraw money from my PPF Account?

    Ans: Yes, you can withdraw the money deposited in your PPF Account under 2 conditions:
    • Money can be withdrawn once a year
    • Money can be withdrawn only after the 7th financial year
  • Q. 4 What is the minimum amount that I can deposit in my PPF Account?

    Ans: Any amount ranging from Rs.500 to Rs.1,50,000 per annum can be deposited in your PPF Account. the returns will vary according to the depositions made in the account.
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