A PPF is a saving as well as tax saving mechanism prevalent in India which Individuals as well as Hindu Undivided Families can open an account of. All State Banks of India as well as nationalized banks have the provision for a PPF account. ICICI was the first privatized bank which secured the provisions for a PPF account. NRIs cannot open an account under the PPF rules and regulations. Please note that the Rate of Return on a PPF is 8.1 % per annum after recent revised in 2016-17 financial year, earlier it was 8.7% per annum. Interest is further calculated on the lowest balance existing between the closing of the fifth day and the last day of every month. Additionally now onward, the interest rates of PPF will be revised quarterly.
A PPF account is held for a period of 15 years applicable for re subscription. It must be remembered that investments made in a PPF account are in the multiples of 5 only, either wholesomely or in installments.
Here is a method of calculating the PPF with an example:
The main theme line of calculation of a PPF is that:
The interest is calculated on a monthly basis by taking the lowest balance of month. However, the total yearly interest is added to the PPF at the year end.
The interest that is earned in a year will be added back to final amount at the year end. The calculation of the interest and addition of it to the Public Provident Fund account at the year-end depends on where the money is actually invested. The interest calculated has been decided upon the government to be 8.8% per year.
Advantage of PPF
After working in an organization for long years of time, PPF gets collected in a government PF account and generally after retirement enjoys the benefit of the money stored as savings. Even the employee can use as a monthly installment scheme to keep it in a post office to get more benefit. Therefore, PF is a lifetime savings in huge amount to be used in various purposes as after retirement settlement scheme. PPF is one of the mostly calculated savings in the account of government and the method of calculation is highly effective. So to obtain better benefit PPF it is stored and kept in huge savings for future purpose in all aspects. Thus, PPF is highly beneficial is all aspects due to its huge savings of an individual.
The idea of Public Provident Fund is a great support to our country’s economical growth. First, some amount of money is saved out of the earning of every individual. Second, this money is used in the economical growth.