How PPF Interest is Calculated?

Public Provident Fund (PPF) is a popular long-term savings scheme backed by the Indian government. It offers attractive interest rates and tax benefits, making it an ideal investment avenue for many. One crucial aspect of PPF that investors often seek clarity on is how the interest on their PPF account is calculated.

Basic Terms:

1. Principal Amount: The principal amount refers to the total sum deposited in the PPF account by the investor over time.
2. Interest Rate: The PPF interest rate is set by the government and revised quarterly. Currently, it stands at 7.1% per annum.
3. Compounding: PPF interest is compounded annually, meaning the interest earned each year is added to the principal amount, and future interest calculations are based on this increased amount. This magnifies your returns over time.
4. Calculation Period: Interest is calculated on the lowest balance in your PPF account between the 5th and the last day of every month. So, even if you make deposits throughout the month, only the minimum balance during this period is considered for interest calculation.
5. Crediting Interest: The calculated interest for the entire year is credited to your PPF account at the end of the financial year (March 31st).

The Public Provident Fund (PPF) is a popular long-term investment scheme in India, offering attractive interest rates and tax benefits. But have you ever wondered exactly how the interest on your PPF contributions is calculated? This article will delve into the nitty-gritty of PPF interest calculations, making it easier for you to understand how your money grows in this scheme.