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Public Provident Fund
Interest Rate: PPF or Public Provident Fund is a widely favoured savings option because of its government backing, good interest rate, and tax benefits. A PPF account has a tenure of 15 years. This means that the account remains active and can receive deposits and earn interest for a total duration of 15 years from the date of opening.
It has a mandatory lock-in period of 15 years, that is, the funds deposited in the PPF account cannot be withdrawn fully or partially before the completion of this period.
Individuals can deposit amounts ranging from Rs 500 up to Rs 1.5 lakh per financial year. After 15 years, a PPF account can be extended in blocks of 5 years. Its returns based on the power of compounding make it an attractive investment option for conservative investors.
What is the latest interest rate of PPF?
The
PPF interest rate
is set by the Indian government and is subject to quarterly adjustments. As of the latest update for July-September 2024, the PPF interest rate stands at 7.1% per annum, compounded yearly. The interest rates for
small savings plans
for the quarter July- Sept 2024 are all unchanged.
Also Check | Public Provident Fund Calculator: Planning to open a PPF account? Top 10 FAQs Answered
PPF: Importance of Timely Deposits
Interest on PPF is calculated monthly. The balances on the 5th and last day of a month are compared, and the lower one is considered for the calculation of returns. Say, if your account had a balance of Rs 5,000 and Rs 1,000 on the 5th and 30th of June prospectively, the latter will be considered while calculating returns for the month of June, states an ET report.
Therefore, depositing contributions by the 5th of each month maximises returns, which are credited annually.
What is the eligibility for opening a PPF account? What about NRIs?
PPF accounts cannot be opened by Hindu Undivided Families (HUFs), trusts, or Non-Resident Indians (NRIs).
If a resident becomes a non-resident Indian (NRI) during the maturity period of the PPF scheme, they can continue to contribute until maturity, but only on a non-repatriation basis. That is, the funds held in the PPF account cannot be transferred or repatriated abroad; they must remain within India.
How are PPF returns taxed?
PPF falls under the Exempt-Exempt-Exempt (EEE) category, meaning deposits, interest earnings, and maturity proceeds are tax-free. Investors can claim deductions under Section 80C of the Income Tax Act, up to Rs 1.5 lakh annually. Interest earned on PPF is also exempt from tax under Section 10 of the Act.
Tax benefits under PPF can be claimed while filing Income Tax Returns (ITR) annually, supported by proof of investment documents.
