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You might have read about online PPF calculators available. Do you know what it is and how does it work? PPF calculator refers to the simple calculator that determines interest earned on your investment in PPF account. The basic idea behind PPF calculator is compounding the interest on your investment.
Although, you can exercise this method manually when you have to calculate interest for one year. But, when it comes down to fifteen or ten years, the calculations can be messier. So, to save you from hassle, dozens of online calculators are available for PPF calculation.
What Is Public Provident Fund Account?
In simple words, Public Provident Fund is the saving scheme that helps income class to build the retirement corpus. With this scheme, you can invest your savings for fixed period and will earn the significant amount of interest. For quarter Jul-Sep'19 the PPF interest rate is 7.9% only. That is reasonable!
As mentioned in starting, the Government of India introduced this scheme for encouraging investments amongst different income groups. So, this account can be opened with a low and affordable amount of deposit.
The second attraction to this scheme is the tax benefits. The interest earned is completely tax-free. And, this scheme is backed by the government, so comes with security. No doubt, why PPF is so popular in India!
How to open PPF Account?
PPF is easily accessible. You will face no problem while registering for the account. To open a new account, you have to visit the authorized bank or post office. Simply, get the form, fill it and submit with required documents.
Why Should You Choose PPF Scheme?
Some people don't opt for PPF scheme because they don't know its features and benefits. For your convenience, I have outlined some of them as follows:
PPF Account: Key Features
1. Interest Rate
The Indian Government set the interest rate for PPF periodically, usually annually. You earn interest on investment per annum, and it will compound automatically. The interest rate for quarter Jul-Sep'19 was 7.9% that is pretty good!
2. Tenure
To avail the benefits of PPF, you need to keep the account active for fifteen years. It means you need to invest in this account per year for fifteen years. After maturity, you can invest for further five years.
3. Initial Deposit
You can open the account with Rs. 100.
4. Minimum/Maximum Annual Deposit
To keep the account active, you have to make a deposit every year. The minimum amount is Rs. 500 and the maximum are Rs. 1.5 lacs per years. You can make deposits with a cheque, cash, PO, online funds transfer and DD, etc.
5. Withdrawals
Withdrawal is allowed after maturity. Well, premature withdrawal can be made, but on certain conditions and after seven years from opening date. Otherwise, premature withdrawal is not possible!
6. Tax Advantages
The tax rebate is the main attraction of PPF. The interest earned is completely tax-free.
How To Calculate The Interest Using PPF Calculator?
Calculation of PPF interest is not difficult. So, what is the exact algorithm of PPF calculator?
As mentioned earlier, the interest will be compounded annually.
For instance, you have made the initial investment of Rs. 1.5 lac. So, you will calculate the interest on Rs. 1.5 lacs at the rate of 7.9% only. Pretty easy right! Now, we have to compound it. Next year, you will make an investment of Rs. 1.5 lacs again. Now, the rate will be applied to the sum of previous year's balance including interest earned and current year's balance. And this process will be continued for fifteen years.
Don't indulge in this hassle. Dozens of online calculators are available. Just Google it and calculate the interest for any amount of deposit.
Wish to learn more about it, here's a complete guide to PPF.
Which PPF Calculator have you tried? Do share your feedback.