Public Provident Fund (PPF), launched by the Government of India in 1968, is a tax-deductible, low-risk saving scheme.
It is a means for converting small savings to long-term investments that provide retirement benefits to self-employed persons.
Government saving schemes like PPF in India are quite popular. A survey conducted by Nielsen revealed that saving and investing in the Asia-Pacific led globally at 61% and 37% respectively.
The PPF interest rate is 7.1% in 2020-21, and the minimum lock-in period is 15 years.
A significant advantage of PPF investments is that you can take loans against your account for expenses like a marriage or educational costs for a child.
Until a few years ago, many aspects of how PPF works were a mystery to most people.
Even professional accountants would have to pull out their calculators and make complicated calculations which would entail pages and pages of workings.
However, the one thing that has revolutionised how these calculations are done is the PPF Calculator. It is a simple-to-operate online tool that anyone can use.
There are many versions available, but they all work on the same principle with identical results. Enter the essential information to see the interest you earn and the total maturity amount.
If you have a PPF account, you would be interested to know how much principal and interest has accrued after a certain number of years.
Previously, the calculation used to be complicated, and you would need an accountant to show you the figures.
The PPF Calculator does the work of several calculations in an instant. Fluctuating interest rates, which are revised every three months, are considered. It does the computation based on the information you provide.
The time of the year you invest is also critical. The interest for the financial year is calculated on the amount invested before the 5th of each month.
If deposits are made after the 5th, the interest will be less, and the calculator will compute accordingly.
You can get the PPF Calculator in different modes. Some of the modes that you may come across are:
Each mode has a particular outcome depending on your individual scenario. Here are the possible results for each calculation mode:
The calculator calculates the amount that you are likely to earn if you invest a particular amount on an annual basis for 15 years.
The calculator will throw up a quick estimate on the amount that will be accrued from investing a monthly fixed amount for 15 years.
Here, you can see the amount you will earn if you invest different amounts every year – the calculator will also show you projected rates of interest for the future.
The variable monthly amount mode involves the most complicated calculations of all the modes. You can add random monthly amounts to reach a final figure at the end of a 15-year term.
Unlike an employer-linked provident fund, PPF is voluntary, and there is no minimum age. Hence, someone like your parents or grandparents can make PPF contributions on your behalf from the day you are born.
If PPF contributions were made on your behalf from a very young age, you might like to continue to contribute as an adult.
It means that you would probably be looking at terms like 20 years or 30 years. It effectively exceeds the 15-year lock-in period.
For the above scenario, you would need an “extension calculator” to calculate the amount you will earn after the extension period.
The extension calculator calculates for two scenarios: if you do or don’t contribute during the extension period.
An online PPF Calculator is the quickest and most convenient way of calculating your PPF interest accrual and amount on maturity.
You don’t need to install dedicated software on your laptop, PC or handheld devices – open the webpage and use it. The platform also offers the latest updates to keep you abreast of the trends.
You may start by investing in a particular pattern, like say, monthly contributions, or consider switching to annual contributions after a few years. The online PPF Calculator will give you all the information you need.
Another benefit of these online calculators is that the results are often graphically represented. Easily-readable chats and summaries will give you a clearer picture of what is happening with your money.
Using a PPF Calculator is crucial because it saves you from having to consult an accountant or spend time manually calculating your projected income from your provident fund.
This calculator is a boon to accountants and financial consultants. It prevents the necessity to perform complicated computations that run into multiple pages. So, accountants rely heavily on this calculator.
But, what if you, as an investor, are interested to know how your investment works out?
You can play around with the online calculator to see the various permutations and computations, thereby finding great use from it.
An amount of ₹30,000.00 was invested before the 5 April 2020. The previous balance was ₹70,000.00. The lowest monthly balance for the year would be ₹100,000.00.
The monthly interest @ 7.1% (the interest rate for January to March 2020) would then be ₹658.33. See the chart below:
A Typical PPF Calculation
To sum up, if you contribute to a PPF, this online calculator has multiple advantages as follows as you can know:
Keep an online PPF Calculator with you, and never lose sight of how your money grows in your provident fund over the years. Always know how much money you can obtain when you need it the most.