While the government has raised the interest rates on all small savings schemes, the interest rate on PPF remains unchanged.
With a long tenure of 15 years, the PPF continues to offer an interest rate of 7.1% for the April to June 2023 quarter, which has remained the same for the past three years since April 2020.
Despite the absence of any hike in PPF interest rates, it continues to attract a significant number of people due to its tax-free status under both the new and old tax regimes.
Under the previous tax regime, individuals who invested in PPF were eligible for tax deductions of up to ₹1.5 lakh per annum under Section 80C of the Income Tax Act.
Additionally, PPF interest rates have consistently been higher than the fixed deposit interest rates offered by banks.
Interest rates on PPF investments are applied quarterly to the entire investment amount.
The interest earned is typically credited to the investor’s account at the end of the fiscal year and compounds annually.
The interest is calculated based on the lowest balance between the fifth day and the last day of the month.
If you plan to invest in PPF, it’s advisable to do so on or before the fifth day of the month to maximize your returns.
The minimum and maximum investment limits for a PPF account are ₹500 and ₹1.5 lakhs, respectively.
Important features of the PPF account
- PPF refers to an investment scheme that is completely secured and is offered by the government.
- PPF has a very long lock duration of 15 years, and after that, if the account holder wants to extend the duration, they can do so for another 5 years.
- It’s a very good tax-advantaged instrument as the amount invested, the interest generated, and the total maturity amount are all tax-free.
- You can open a PPF account with as little as Rs 500 and as much as Rs 1,50,000 every year. So you don’t need a large sum of money to open a PPF account. It also comes with the advantage of not making the deposit each year to keep your account active.
- After three years of saving in a PPF account, you can borrow against your invested amount.
- A PPF account can be created in the name of an individual or, in the case of a minor, as a guardian.
- In the case of the account holder’s death, the entire accrued sum is given to the nominee, which is referred to as a death benefit.
- PPF accounts may only be opened by Indian nationals. NRIs and HUFs.
- Account holders can deposit either regularly or once a year in a single sum.
