Tips to Earn Maximum Interest on PPF
The Public Provident Fund (PPF) is one of the most popular, unique and preferred savings product available for consumers to invest. An extremely secure product and offering guaranteed returns, PPF is completely exempt from taxes. It falls under the Exempt-Exempt-Exempt (EEE) category.
Your PPF contributions allow a tax deduction of up to ₹ 1.5 lakhs per annum. Funds in your PPF account are compounded annually. Thus, it is beneficial to include PPF in your overall investment and savings portfolio. Now we tell you how you can maximise interest on your PPF contribution.
How to Calculate Interest on PPF?
The Government announces the interest rate on PPF for each financial year annually. The current interest rate on PPF contributions is 7.1%. The balance in your PPF account is compounded annually, but it also earns compound interest every month.
You can calculate the interest earned on PPF by using PPF calculator available freely. You may choose the frequency at which you wish to contribute (monthly, quarterly, half-yearly or annually) and the amount you wish to contribute.
The PPF calculator will automatically indicate the principal amount to be contributed, the maturity amount and the overall interest earned.
How to Earn Maximum Interest on PPF?
One thing to get maximum interest rate is to contribute by the 5th of every month.
The interest is calculated on the minimum balance between the 5th of the month and the last day. Thus, you must contribute by the 5th of every month. If you contribute funds even on the 6th of any month, this amount will not be considered for interest calculation until the next month comes up.
If it hits your PPF account on the 6th, then it will be calculated between the 6th and the end of the month. This means your money could be lying in your account without earning any interest for one whole month, or more.
Contribute up to ₹ 1.5 lakh per annum
You can contribute up to ₹ 1.5 lakh per annum to your PPF account. It is ideal to invest maximum in your PPF account every year to make the most of this opportunity.
Suppose you contribute ₹1.5 lakhs per annum for 15 years. Consider that the rate of interest is 7.1%. The maturity amount after 15 years will be ₹ 40,68,208.
Max out your PPF account by April 5th
You can make any number of contributions in a financial year or you can do it every month for all 12 months or do it once in a year thats your choice but total amount must be ₹ 1.5 lakhs for maximum benefits. To earn maximum interest, you should contribute the entire amount by the 5th of April. Thus, interest will be calculated on this amount for the next 12 months. This will fasten up the pace of compounding your savings.
You must open a PPF account, irrespective of whether you already have an employee provident fund account or are self-employed.
A Public Provident Fund (PPF) account can be opened via your savings account internet banking. It's a completely paperless process and you can make online contributions every year easily with the comfort of your home or office. This is the way for getting maximum interest on PPF.