PPF Account and PPF Interest Rate @ 8.7%

We all have heard a lot about PPF Account and seen our parents make investment but what is PPF Interest Rate in India and what are the benefits of investing in this form of Instrument? This is one question which usually crops up in our minds and in this article we have tried to explain the basics and the benefits of investing in this form of Tax-Saving Instrument.

What is PPF?

PPF Account refers to Public Provident Fund Account and is a Long Term Debt Scheme of the Govt. of India on which regular interest is paid. Any Individual in India (whether Salaried or Self-Employed or any other category) can invest in this scheme and can earn a handsome tax-free return on the same which is usually higher than the return offered by Banks on Fixed Deposits.

Public Provident Fund can be opened in any Post Office and some authorized branches of Banks. Many Individuals have expressed a preference towards maintaining a PPF Account in a Bank as compared to a Post Office as Banks permit online deposits in your Public Provident Fund whereas Post Offices don’t provide this facility.

Recommended Read:

  1. PPF Account in SBI
  2. PPF Account in ICICI
  3. Public Provident Fund in Post Office

public provident fund PPF Account and PPF Interest Rate @ 8.7%

Non Resident Indians (NRI’s) are not allowed to invest in Public Provident Fund. However, if someone opens a Public Provident Fund while he is a Resident of India but subsequently becomes a NRI, he shall be allowed to continue investing in his account.

PPF Account can be opened on behalf of a minor either by father or mother, but both cannot open this type of account on behalf of a minor. Grand Parents cannot open public provident fund account on behalf of a minor. However, in case of death of both the parents, the grand parents can act as a guardian of the minor and open an account.

Maximum and Minimum amount to be deposited in PPF each year

As per the Public Provident Fund Scheme (Amendment Rules 2014), at the time of opening an account for the 1st time, either on his own account or on account of a person for whom he is a guardian shall apply in Form A, togethor with the initial amount of subscription i.e. Rs. 100.

On receipt of the application form, the Accounts Officer shall open the account and issue a passbook in which all entries related to deposits, loans, withdrawls should be stated. In case of Online Banking, a Statement of Account should be issued in place of the Passbook at the discretion of the account holder.

Although a PPF Account can be opened with Rs. 100, as per the Public Provident Fund Act, 1968 framed by the Govt of India, the Minimum amount to be invested in this account every year is Rs. 500 and the Maximum amount that can be deposited in a PPF Account every year is Rs. 1,00,000. Every subscription shall be made in Cash/Crossed Cheque/Demand Draft/Pay Order/Online Transfer in favour of the Accounts Officer at the place at which that office is situated.

If a Public Provident Fund Account Holder does not deposit Rs. 500 every year in his account, a penalty of Rs. 50 each year would be levied along with the arrears of subscription of Rs. 500 for each such year.

This amount may be paid in 12 monthly instalments or in lump-sum at the option of the Account Holder. Earlier HUF’s were also allowed to invest but now HUF’s are not allowed to invest in Public Provident Fund. RBI has also announced that if any HUF had opened a Public Provident Fund Account prior to 13th May 2005, they would be allowed to continue and would be closed on expiry of 15 years from the date of opening the account

PPF Interest Rate

The PPF Interest Rates are benchmarked against the 10-year Government Bond Yield and is 0.25% higher than the average Govt. Bond Yield. PPF Interest Rates are announced every year by the RBI in the month of March for the upcoming Financial Year. The PPF Interest Rate as announced by RBI for the financial year 2014-15 is 8.7%.

PPF Interest is computed for a calendar month on the basis of the lowest balance in an account between the close of the 5th day and the end of the month and the Interest on PPF Account is credited to the account of the account holder at the end of the year.

PPF Interest Rate for the current and the past few years is given in the table below

Financial Year PPF Interest Rate
2011-12 8.6%
2012-13 8.8%
2013-14 8.7%
2014-15 8.7%

How to earn maximum PPF Interest

As explained above, Interest on PPF Account is computed on a monthly basis depending on lowest balance in your account between 5th and end of the month. Therefore, if you don’t deposit any additional amount in your PPF Account before 5th of the month, you wont be earning any interest on such additional amount. In such a case, your lowest monthly balance would be on 5th and irrespective of the amount you deposit after 5th of the month, you won’t be earning any interest on such additional amount.

Therefore, it is always advisable to make all additional deposits before the 5th of every month so as to earn maximum interest on such additional amount.

The ideal way to earn the maximum possible interest on ppf account would be to deposit Rs. 1,00,000 before 5th April so that you can earn interest on the whole 1 lakh for the complete financial year. A one-time deposit made at the beginning of the year will help you earn maximum possible interest.

In case you intent to deposit small amounts every year, try to do the same before 5th of the calender month as explained above. to explain in figures, if you deposit Rs. 10,000 before the 5th of every month for the next 10 months, you would earn Rs. 75 extra per month which would lead to Rs. 750 every year. If this amount is deposited after 5th, you won’t be able to earn this additional ppf interest.

The Interest on your PPF Account would also be computed in the same manner as discussed above. To compute the PPF Interest, you can also refer to this PPF Calculator prepared by Manish Chauhan of Jagovestor.com

Tenure of Public Provident Fund

PPF in India can be closed at any time after the expiry of 15 years from the date on which it was opened. The whole amount in this account can be withdrawn at the time of Closure. For Closure of account, the account holder shall apply in ‘Form C’ and also furnish the Pass Book of his Account.

Extension of PPF Account – However, on the expiry of 15 years, the Account holder can also apply for extension of duration for a further time period of 5 years. In case an account holder opts for extension, he shall also be eligible for Partial Withdrawal by applying in ‘Form H’, subject to the condition that the total of the withdrawals during the extended 5 years shall not exceed 60% of the balance in his account at the time of extension.

Pre-Mature Withdrawal from Public Provident Fund - There is a lock-in period of 5 years and an Account Holder can withdraw money only at the end of the 5th year. The maximum amount that can be withdrawn is 50% of the amount that stood in his account (whichever is lower among the following two): -

  • At the end of 4th year or
  • At the end of the previous year in which Withdrawal is sought to be made

If the Account Holder has taken any Loan against this amount, it shall also be deducted from the above figure computed above.

Loans on PPF Account

Loans can be availed from the 3rd financial year excluding the year of deposit. Amount of such loans must not exceed 25 percent of the amount that stood to the account holder’s credit at the end of the second year immediately preceding the year in which the loan is applied for.

A fresh loan is not allowed when a previous loan or interest is outstanding. Interest Rate is 1% if repaid within 36 months and at 6% on the outstanding loan after 36 months. The repayment may be made either in lump-sum or in installments.

Tax Benefit of Investing in Public Provident Fund

The amount reflected in the Public Provident Fund Account consists of 2 parts, firstly the amount which you have deposited in this account i.e. the Principal Amount and secondly the Interest that has been earned on this amount deposited.

The tax benefits for investing in this account are available for both the Principal component and the Interest component.

  1. Tax benefits on the Principal component: The amount deposited in this account can be claimed as a deduction from the Gross Total Income under section 80C at the time of filing of income tax return. The amount that can be claimed as a deduction under section 80C is limited to a maximum of Rs. 1,00,000 p.a. The total taxable income computed after deduction under section 80C is liable to tax as per the income tax slabs of the taxpayer for that year.
  2. Tax benefits on the Interest on PPF Account: The interest on PPF Account is also exempted from the levy of income tax. In other words, no income tax is levied on the interest on PPF Account and this income is tax free.

PPF Account vs Tax Saving Fixed Deposit

Another Fixed Interest earning Investment which is allowed to be claimed as deduction under Section 80C is Tax Saving Fixed Deposit. Both Public Provident Fund and Tax Saving Fixed Deposits are allowed as deduction under Section 80C upto a maximum limit of Rs. 1,00,000 p.a.

The maturity of Tax Saving FD is 5 years as compared to maturity of Public Provident Fund which is 15 years. But the interest earned on Tax Saving Fixed Deposit is taxable as compared to interest earned on PPF Account which is tax free.

The following article throws more light on the same and explains when investing in Public Provident Fund is advisable and when investing in Tax Saving FD is advisable

PPF Account vs National Savings Certificate (NSC)

Both Public Provident Fund and National Savings Certificate (NSC) are schemes wherein deposits are made in the Post Office/specified banks but are backed and maintained by the govt. However, the major difference between these two is that National Savings Certificate is a one time deposit scheme whereas in Public Provident Fund you have to invest a minimum specified amount every year so as to keep the account active.

The Maturity period of National Savings Certificate is also lower i.e. 5/10 year as compared to the maturity of the Public Provident Fund which is 15 years

Other Points to Note

  1. Investors are requested to note that each individual is eligible for only 1 PPF Account per person. If an Individual is detected with having more than 1 Account (except when on behalf of minor), then the 2nd Account would be closed and the entire amount  invested shall be refunded. Only the principal amount will be refunded and the Interest thereon will be forfeited
  2. Public Provident Fund can only be opened in Individual’s Name and not in a Joint Name. However, a nominee can be appointed for the Public Provident Fund. On the death of the Account Holder, the nominees cannot make any additional contribution on the death of the deceased.
  3. If the Account holder dies and no nominee has been appointed by him, the amount deposited in his Public Provident Fund Account would be awarded to his Legal Heirs.
  1. there is one another benefit in income tax act….on the maturity when an assessee record the maturity amount in the books ….no action will taken against it whether assessee made contribution through his unaccounted money…..

  2. Hi,
    Just want to know that we need to deposit some amount every month or we can deposit anytime in the year?

    • @Shahansha

      The manner and time of deposit is at the option of the Account Holder. You can deposit it either monthly or yearly, as you feel comfortable

      The Interest would be paid to you accordingly calculated by calender month on the basis of the lowest balance between 5th and 31st of that Calender month

      • Apne pf a/c me 5 tarikh tak paise jama kar de anyatha 5 tarikh ke bad ki gai amount par interest pure month ka us jama ki gai amount par nahi milega. That I have observed in my pf a/c in IDBI Bank.

  3. I want some clarification that which option is better: Monthly Deposit or Annual Deposit in this scheme ?

    • it is as per your choice .. if you want maximum interest for the amount paid for the year then you should invest annual deposit between 1st of April to 5th of April.. as in that case you will be maximize your interest for each financial year ..
      BTW, up to 12 times a year you can deposit money to your PPF account (subject to maximum limit 100000 per annum)

  4. I want a clarification whether the increased maximum limit of deposit (i.e. from 70k to 100k) & incresed rate of interest are applicable for this financial year 2011-12 or from 2012-13 ?

  5. Hi all ,
    This is really very good information given by all of you ,But i have one doubt that if i pay in one year above 1 lakh suppose 1.80 lakh then the time of maturity shall i get Tax free return on my all amount ( 1.80 lakh ) or only on 1 lakh.

    • @Bhupesh

      The maximum limit for Investment is Rs. 1 Lakh only and in no case you can invest more than Rs. 1 Lakh in this form of Investment

  6. hi
    nice informative article for people who dont know much about worthy investment options. i have a doubt to clear. i opened my ppf a/c with sbi on 23/12/2013. so from whence will my year be calculated (for maintaining the 1 lakh limit) i.e. dec-dec or financial or calender year? also clarify regarding the calculation of interest in my case..
    thanks in advance

    • Dear Anup

      The limit of Rs. 1 Lakh is for each Financial Year

      The interest is calculated on a monthly basis by taking the lowest balance of the month. However, this interest wont be added in your account at the end of each month. The total interest for 12 months would be added in your PPF Account at the end of each financial year

  7. Hello sir. I want to know that most bank policy are providing double money in 10 years eg hdfc crest u have to deposit 50000 per year for 5 years n u will get back 5 lac after 10 years but there is tax on intrest .But in ppf by depositing 50000 per year for 15 year you will get back 15 lac means amount double in 15 year but there is no tax deduction in intrest . It means you have wait for 5 more year . Is this benificial?

    • Dear Sir

      Many Banks have these days aggressively started promoting such schemes. But if you carefully analyse, the returns given by them are not much. Moreover, the returns are also taxable.

      I would first advise everyone to invest in PPF. Once you’ve invested 1 Lakh in PPF, you can then think of investing in Fixed Deposits.

      You should only invest in the scheme that you are talking about only when you want to earn fixed income after a certain no. of years as is the case with Senior Citizens

  8. Sir. I want to know that in a ppf account after completion of 15 year entire amount accumulated that we will get after maturity is taxable or not. thanks

    • Dear Manish

      The best part about investing in PPF is that the whole amount received on maturity is exempted from the levy of income tax and no tax would be levied on the same

  9. My two questions are:-
    1. on completion of 15 years, if I do not opt for extention, what rate of interest I will get.
    2. On completion of 15 year, If I opted for extension, can I withdraw whole deposit before completion of extended period. If not how much amount I can withdraw.

    • Dear Sir

      1. Rate of Interest on PPF Account is decided by the Govt and keeps changing every year. The interest rate will depend on the rates prevalent at that time.

      2. In case you opt for extension of PPF Account, you cannot withdraw the whole amount. You can only withdraw 60% of the amount in your account at the time of extension.

  10. I understand the maximum tenure for a PPF is 15 yrs and it can be extended as a block of 5 yrs. Say suppose i invest 10K Rs every year and at the end of 15 yrs i have increased the tenure to 10 more years. At the end of my 25 yrs, i wanted to confirm if the maturity amount obtained will be compounded as well for the 10 yrs that have lately been extended.

    Also i am planning to have the PPF opened in ICICI bank, Let me know if it is safe to open there or any other Nationalised bank

    • Dear Rajesh

      The interest would be added to your PPF Account and the end of each year and therefore you’ll get the benefits of compounding every year.

      Opening a PPF Account in ICICI Bank is completely safe and convenient as well as you can transfer the funds online

  11. I would like to open a PPF Account. I understand that PPF account can be opened from any Nationalised banks,Indian Post office and from ICICI Banks.
    What is the difference among those 3 above mentioned. And which one would be beneficial and secure mode please suggest me.

    • All these are basically means of mobilising resources and the funds are in turn deposited with the Govt of India…

      Earlier, PPF Accounts were only allowed to be opened in Post Offices but now Banks are also allowed to do the same… The benefit with Banks is that they facilitate faster and Online Transfer of Funds and the whole process is much easier…

      Therefore, it is advisable to open a PPF Account in the same bank in which you have your savings account… The interest rate and the safety of funds is the same in all Banks and Post Offices…

  12. Thanks Karan for your insightful response. I have a couple of more clarification though not related to this but think you can suggest me of….

    1. RD – Recurring Deposits:

    I understand that we have a maximum tenure of 10 yrs that is being provided for RD. Can you please confirm if the maximum tenure of RD can be extended so that we can have obtain the power of compounding ?
    2. Financial APP:

    Is there any financial app or expenses\investment kind of app or software that you can suggest of so that its easy to keep them have tracked..

    Thanks much and awaiting you valuable response. Thanks …

    • Dear Rajesh

      1. As the max tenure for RD is 10 years, you can always withdraw the amount after 10 years and then deposit the whole amount in a normal fd. By doing this, you would be able to avail the benefits of compounding.

      2. There are a couple of Financial Apps which help in tracking investments and expenses. However, I haven’t explored this area so I’m not the right person for this.

  13. Hi
    I have PPF Account in SBI. Let me know it is include pension funds or its needs to take a separate policy for pension.

    Regards,
    Trilok Sharma
    +918196987159

    • Dear Trilok

      PPF and Pension are different things.

      You will have to take a separate policy for pension

    • The safety of capital and interest rate on PPF is the same in all banks as all this money is in-turn deposited with the govt and the banks are only acting as collection agents on behalf of the govt.

      For the benefit of conveyance, it is always advisable to open a PPF Account in the same bank in which you have a bank account

  14. After the extension of the PPF account for 5 years (15+5), i would like to continue my account without depositing in it. I may use it as my pension every month / quarter. I understand the interest earned on the amount will continue as per the govt. declaration every year even if the extention period is over.
    Pl explain in detail about my understanding.

  15. Loan on PPF: If i take a loan from my PPF aacount not exceeding 25% of the balance amount and expected to pay with in 36 months, What will be the Annual RATE OF INTEREST on the loan amount?

  16. Hello,
    I have a question here.
    Assume I start a PPF account opting to pay 50k per annum. whether in the same or subsequent years can I pay upto 1 lakh per annum and again switch back to 50k per annum in following years.
    What is the best amount to be choosen at the time of opening a/c.
    Is maximum limit (i.e, 1 lakh) better?
    pls. clarify.
    thanks.
    Nagaraj.

  17. HI All,

    Needed some help. I am planning for a PPF account and would be summing 60K by March 2014. And suppose i plan to take out the money at 5 years i.e before the 15yrs limit. Then would they allow me to take out the 100% of it ? And would it be wise to invest a less amount initially as i came to know the invested amount can be taken out only after 5yrs.

    Thanks,
    Abhinab

    • According to the article, you can withdraw upto 50% after 5 years. If you want to diversify your investment you can choose equity options. And find out the benifts you get from other fixed return investments after taxes. This is a tax saving and tax free investment so calculate accordingly.

  18. Dear Karan…very happy with the help provided by u. I have a PPF A/c which has been extended 2 times for 5 years blocks. Is it compulsory to make the application for extension. If I don’t apply for extension, can I still continue my A/c with or without Contribution ? Further, if I don’t apply for extension, can I close the A/c any time & withdraw whole balance without the restriction of 5 years ? Please guide me by email. Thanks.

  19. The opening rate of interest remains constant for the tenure of the account, or it changes every year according to Govt. declaration?
    Example:- 2013:- it’s 8.7% and i open my account, will the rate be 8.7% for this account till 2028?
    or if ppf rate become 8.5% in 2014 it becomes that amount?

    • Dear Sambit

      The PPF Interest rate does not remain constant and keeps changing every year… It is announced by the Govt usually in the month of March for the next financial year starting from April

  20. Hi
    This is prem chandra agrahari, and I am working in escorts ltd. I have already pf account which is provides by company. I want to know that can i get the ppf acoount opened in sbi seperated from my company?

    • Dear Sir

      PF Account and PPF Account are different things.

      Even if you have a PF Account, you can always open PPF Account as well. As PF and PPF are both very good investment options, a major chunk of the salaried people opt for both these accounts.

  21. Dear sir

    I have opened my PPF amount in year 2006 at present i have total amount Rs 800000 in account. Now if i want to take loan the what will be the maximum loan figure also what will be the interest rate on that amount. Suppose at present i m getting 8.7% interest for first 36 month interest rate which we have to pay will be 8.75+1% = 9.75%.
    please clear me

  22. Hi Karan,

    I have 2 questions:

    1. Since PPF account in post office does not allow e-payment, I have to go to the post office and pay. Should it be in the same post office where I opened my account or any post office?
    2. What is the procedure to change PPF account from Post office to SBI ? Is this possible? if yes, arethe rules, interest % etc, the same?

    Thanks

    • Dear Priya

      You can transfer your account from Post Office to any Bank by submitting an application and Form SB-10b to the Headmaster.

      Once your request is processed, your account would be transferred.

  23. Dear Sir,

    Pls. advice whether an employee claiming house rent exemption can claim simultanious deduction u/c 80C towards repayment of housing loan (principal and Interest)

    • Dear Sir

      Yes, you can claim both – House Rent Allowance as well as Deduction u/s 80C for Repayment of Housing Loan

  24. Thank you very much for such an informative article.
    I have a question.
    Though, the PPF interest rate is declared by the Govt, why does it differ in Post Office (8.5%), Nationalized bank like SBI (8.7%), and ICICI bank (8.25%)? When I enquired, I got these three different rates of interest. Please clarify.

    • Dear Sir

      PPF Interest is the same whether its Post Office or SBI or Bank.

      You may have wrongly checked interest rate for some other instrument. I request you to kindly check again

  25. Dear Sir,
    i am planing to open a ppf account in sbi Bank, but i want to know if i invest some bulk amount Rs 30000 in ppf account in particular month (April 2014-2015 at 8.7 % of interest, after that i am not paying any amount for the year. in that case i will get interest for the the bulk amount or only for the particular month. let me know the details!!

    Vasntha

    • You would get interest on the total amount in your account.

      For eg: If you invest Rs. 30,000 in the month of April, 10,000 in the month of May and dont invest any amount after that – you will get interest on Rs. 40,000

  26. Sir, If I invest 1 lakh in a year in PPF & another 1 lakh in LIC in same year then what is final outcome as investment is now above maximum limit of 1 lakh ???

    • In such a case, you would be earning interest on both PPF as well as LIC

      But for the purpose of Section 80C, you would only be able to claim a deduction of Rs. 1,00,000

  27. Thanks you so for providing useful information.
    please let me know:
    If i open ppf account in sbi with Rs.50,000/- 1st year.
    can i increase or decrease that amount every year till 15th year. for eg. Apr-14 (50K) Apr-15(35K) Apr-16(70K)

    thanks

    • Yes,

      You can keep increasing/ decreasing the amount every year/month as per your own convinience

  28. incase due to some unavoidable circumstances if i pay my installment towards the end of the year i.e. in the month of feb will i get interest for that fin yr only for that month

    • For the amount already in your PPF Account – you would be paid interest for the whole year

      For the amount deposited in Feb – you would be paid interest from Feb onwards

  29. I need to invest rs. 10000 to get exemption of rs. 100000 as investment in 80 c. I have allready invested rs. 90000 towards my life insurance and DCPS what is d better option to complete 1 lakhs investments by depositing remaining 10000
    1. Fixed deposit
    2. PPF account
    3. NSC
    4. LIC money back option

    • In my personal opinion, PPF is something which is a must have in your portfolio.

      So I would recommend that you invest the balance Rs 10,000 in PPF Account

    • You can extend your PPF Account for another 5 years… When these 5 years are completed, you can extend for another 5 years…

  30. After the extension the PPF A/CFOR 5 yEARS (15+5) I would like to continue my account without depositing in it. Than at whate rate I will received the interest

    • The PPF Interest Rates are decided by the Govt and keep on changing every year.

      It is very difficult for anyone to predict the PPF Interest Rate with accuracy…

  31. I want to invest rs. 24000 per year.so should i invest the whole amount in one time in a year or should i invest it in monthly installments. In which way i can get more interest.

  32. HI Sir,
    Really appreciate your time in answering major questions related to PPF. I have opened my SBI PPF Account in 2008. I have below questions.

    1) Can we do online payments towards SBI PPF Account.
    2) Is there a way to track online our balance from our SBI PPF Account.
    3) Investing once in year between 1st Apr to 5th Apr will yield much interest then going for monthly investments, is that true?

  33. many says that, its better to open PPF account at SBI bank. Does it make the difference if i open at Syndicate bank.

    • The Benefits of PPF would remain the same whether its in Syndicate Bank or SBI or any other Bank

      You can open it anywhere

  34. Sir, the ppf is tax free under section 80c. I wnat to know, any form has to be submitted so that interest amount will get exempted from tax or it will be automatically exempted from tax, as i m non tax payee. Pls. reply

  35. I have opened my ppf account on 31st Jan 2014 in SBI. What will be my financial period so that i deposit Rs.1Lac to get interest & in which year my ppf scheme will mature.
    2. Is it profitable to invest Rs.1 Lacs in one time so that maximum interest may be earned & which is the right date to invest money in a month
    3. The interest income which is earned on ppf is tax free under section 80C. As I m non tax payee, whether any form is to be filled to claim tax free interest or it may be automatically exempted from tax when ppf scheme matures.
    Waiting for earlier reply

    • 1. Financial Year 2014-15
      2. As a simple rule, The earlier you deposit, the more interest you earn. so if you can deposit all amount in one go – you can get max return
      3. You are not required to file any form