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how to calculate returns on your PPF investment?

how to calculate returns on your PPF investment?

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public provident fund (PPF) is a long-term investment plus tax-savings financial instrument. PPF is one of the most popular government-sponsored savings schemes in India. some of the key features of a PPF investment plan include - assured and fixed returns, long-term investment opportunity and income tax benefits.  

PPF: a brief background

the PPF was launched in 1968 by the government of India to initiate small savings in the form of an investment, with the added advantage of return on investment. years later, PPF still remains one of the most popular savings options for many investors in the country mainly due to the tax free return benefit. PPF deposits fall under the EEE (exempt-exempt-exempt) category. so, if you invest up to ₹1.5 lakh annually in a PPF deposit, the principal invested, the interest earned and the proceeds received at maturity are all tax exempt. 

how PPF helps you earn tax-free interest?

PPF is one of the strongest investment tools for building a retirement corpus while saving on annual taxes. PPF is an ideal investment tool for investors who do not want to put their money into risky schemes and want to earn tax-free returns. since PPF investment is backed by the government, the risk factor is very low.

how to open a PPF deposit account?

opening a PPF deposit account is very easy. you can visit any national bank, private bank, public banks, or post offices to open a PPF account. you can also open your PPF account online through the official website of a bank or post office. you can start a PPF investment with as low as ₹500. however, if you miss paying PPF contributions for a year, your account will become dormant. to activate the PPF account again, you will have to pay a minimum contribution of ₹500 and a penalty of ₹50 for each year you didn't make a contribution.

what is the PPF lock-in period?

PPF accounts have a lock-in period of 15 years, and investors can extend it in blocks of five years indefinitely. the investors can choose to make a partial withdrawal after 5 years, subject to conditions. though there is a lock-in period, you can choose to either withdraw some amount or take loans after 7 years. if you compare, the interest earned on PPF investment is far more attractive compared to the bank FDs.

how to calculate interest on PPF?

the PPF interest rates can change from time to time as it’s linked to the interest rates on government securities. the government of India releases the PPF interest rate every quarter. as per the government norms, the interest on the PPF deposit is calculated based on the balance in the PPF account before the fifth of every month. therefore, if you are planning to invest in a PPF plan, it's highly advised to make your deposit before the fifth of every month to get maximum benefit. any deposit made after the fifth of every month will not earn interest for that particular month. 

the interest on PPF is compounded annually. the PPF deposit interest formula is provided below for your reference: 

f = p[({(1+i)^n}-1)/i]

where, 

f refers to maturity proceeds of the PPF

p refers to annual installments 

n is the number of years, and

i is the rate of interest/100

in case you have decided to invest in a PPF plan, and want to know how much you should invest or how much you can earn by investing on a PPF deposit scheme, you can use the CRED PPF calculator. calculating PPF investment returns manually can be a daunting task for many of us. so, here's a simple and easy to use CRED PPF calculator to help you calculate the complex figures easily. 

what are the benefits of using a PPF calculator?

using an online free PPF calculator to estimate the return on PPF deposits has multiple benefits, especially for those investors who are planning their investment for the first time:

  • it saves you from complex mathematical calculation 
  • you can get an idea of how much should you invest yearly to achieve your financial goals
  • you can use the calculator over and over again, changing the variables, until you find the right balance between how much should you invest to reach your desired financial target
  • since CRED PPF calculator is automated, calculation errors can be avoided
  • you can use the PPF calculator to plan your tax-saving investment in a better manner

how to use the CRED PPF calculator?

the PPF calculator by CRED is very simple and self-explanatory. it has a very user-friendly interface and can be accessed by anyone. however, in case you have never used an online PPF calculator before, here is a simple step-by-step guide to help you use this free PPF calculator:

step 1: select the amount of money you want to invest yearly

step 2: select the time period (the minimum investment time period of PPF deposit is 15-years)

step 3: select the rate of interest (the PPF interest rate is released by the government of India every quarter)

step 4: the CRED PPF calculator will show you - maturity value, total investment and total interest earned

note: PPF deposits fall under the EEE (exempt-exempt-exempt) category. therefore, the principal invested, the interest earned and the proceeds received at maturity are all tax exempt.

use the CRED PPF calculator to plan your investment today