Last Updated on October 27, 2023 by BFSLTeam BFSLTeam
Public Provident Fund (PPF) is one of the most popular and trusted investment options in India. It offers attractive interest rates, tax benefits, and long-term savings for your financial goals.
Table of Content
Factors Affecting PPF Returns
The returns from your PPF account depend on three main factors:
- The amount you invest in your PPF account every year
- The interest rate applicable on your PPF account
- The duration of your investment in your PPF account
The Interest Rate Applicable on Your PPF Account
The interest rate on your PPF account is fixed by the Central Government every quarter based on the prevailing market rates of government securities. The interest rate is announced by the Ministry of Finance and is applicable for all deposits made in that quarter.
The interest rate on your PPF account is calculated on the lowest balance between the fifth day and the last day of every month. The interest is credited to your account at the end of every financial year.
The historical and current interest rates of PPF are given below:
| Financial Year | Interest Rate |
| 2010-2011 | 8% |
| 2011-12 | 8.6% |
| 2012-13 | 8.8% |
| 2013-14 | 8.7% |
| 2014-15 | 8.7% |
| 2015-16 | 8.7% |
| 2016-17 | 8.1% |
| 2017-18 | 7.6% |
| 2018-19 | 8% |
| 2019-20 | 7.9% |
| 2020-21 | 7.1% |
| Q1 (Apr-Jun) FY 2023-24 | 7.1% |
| Q2 (Jul-Sep) FY 2023-24 | TBD |
As you can see, the interest rate on PPF has fluctuated over the years, but has always remained higher than the inflation rate and most other fixed-income instruments.
The Duration of Your Investment in Your PPF Account
Your PPF account has a lock-in period of 15 years, which means that you cannot withdraw your money before the completion of this period. However, you can extend your account for another block of five years after the maturity date, with or without making further deposits.
For example, if you invest Rs. 1 lakh every year in your PPF account for 15 years at an interest rate of 7.1%, you will get a maturity amount of Rs. 27,12,553. However, if you extend your account for another five years without making any further deposits, you will get a maturity amount of Rs. 38,76,051.
Also Read: Loan Against PPF Account
Tips to Increase Your PPF Returns
- Invest the maximum amount of Rs. 1.5 lakh every year to take advantage of the tax deduction under Section 80C and earn higher interest.
- Invest early in the financial year, preferably in April, to earn interest for the entire year. If you invest late in the year, you will lose out on the interest for the previous months.
- Invest before the fifth day of every month to earn interest for that month. If you invest after the fifth day, you will not get any interest for that month.
- Monitor the interest rate changes every quarter and plan your deposits accordingly. If the interest rate is expected to increase, you can invest more in that quarter. If the interest rate is expected to decrease, you can invest less in that quarter and more in the next quarter.
- Extend your account for another block of five years after the maturity date if you do not need the money immediately. This will help you earn more interest and save tax on the interest income.
Also Read: What is PPF
Conclusion
PPF is a great investment option for long-term savings and tax benefits. However, you need to be smart and strategic to maximise your PPF returns and achieve your financial goals. By following the tips given above, you can increase your PPF returns and make the most of your investment.
