FinCalC: Why you SHOULD have a PPF Account and How PPF WORKS [VIDEO]

Deposit of Rs. 5000 every month can grow upto Rs. 17,00,000 in your PPF Account.

In this post we are going to see How PPF or Public Provident Fund works, What is the Current Interest Rate and How the Interest is calculated and COMPOUNDED over the years.

Before getting started, Download our FREE Android App(FinCalC) for Calculating your PPF Interest over the years:

Download FREE Calculator - FinCalC

You can also watch this video to understand the basics of PPF, including Interest Rate and Interest Calculation with examples, and How PPF works:

What is PPF?
PPF or Public Provident Fund is one of the popular Saving Schemes in India which helps you in accumulating huge corpus for your long-term Goals due to a lock-in period of 15 Years. It can be considered as a Retirement Fund since the Principal Amount and Interest earned are exempted from Tax during the tenure and after Maturity. The Maturity of a PPF Account is 15 years. After the Maturity, you can either:

• Discontinue and Withdraw your Principal Amount and Interest earned, or
• Continue with the Account for a Block of 5 years.

You can have only One PPF Account with your name. 
PPF Account is suitable for your long-term Goals such as Children's Education or for Retirement Planning, and since it is a Government-backed Scheme, risk is very low compared to other non-Government Investment Plans.

Why to Open a PPF Account?
It has many advantages and provides features which you might be not aware of:

• The Principal Amount and Interest is Exempted from Income Tax.
• You can claim Deductions for the Deposits made in PPF Account in a particular Financial Year under 80C Section while filing your ITR.
• You can open a PPF Account with a minimum Balance of Rs. 100
• You can consider it as a Retirement Account and keep your Account active for the block of 5 years for unlimited number of times if you don't need your Money after Maturity or anytime sooner.

How to Open PPF Account?
You can Open a PPF Account in any of the Nationalized Banks or Post Office. Nowadays, most of the Banks allow you to Open a PPF Account with a minimum Balance of Rs. 100. They will ask you for an Identity, Address Proof and some couple of your Passport-size Photographs. After submitting all your documents, you will be given an Account Passbook to keep track of your Transactions which you can update periodically. Also you can choose to deposit your Amount via Internet Banking if you maintain a Savings Account in the same Bank.
One important point to note is, a minimum of Rs. 500 needs to be invested in a PPF Account every year to keep your Account active, and a maximum of 12 Deposits(in the form of installments) are allowed in a year.

Current Interest Rate :
Currently, the Interest Rate of PPF is 8% (Q3 of FY 2018-19). The Interest Rate is subjected to change in every Quarter. The Interest earned on the Amount in PPF is Compounded Annually. 

Check our video to understand the Interest Calculation process :

YouTube Channel - CLICK HERE

The important thing to note about PPF is that it falls under EEE category, which means, the Principal Amount, Interest Earned over the years and the total Maturity value are all EXEMPTED from any Tax.

UPDATE:
21st September 2018
The Interest rate on PPF Account is raised from 7.6% to 8%. This change is applicable for the quarter Oct 2018 - Dec 2018.

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