How to use the PPF Calculator?

Introduced in the year 1968, Public Provident Fund works with an objective to organize small savings in the form of investment combined with returns. PPF is popularly known as a tax saving investment instrument which helps an individual to create a financial cushion for retirement.

However, while many individuals find PPF to be a complicated investment instrument, it’s rather simple. For the many investors who find it confusing how the interest on PPF is calculated, the PPF calculator is one stop solution. It calculates the interest earned over a time period, the final maturity amount, or the investment growth over the years.

The PPF interest can be calculated every month, based on the minimum balance between the 5th day of the month till the end of the month. However, the total interest per annum is added back to PPF at the year-end. The PPF interest rate changes on a quarterly basis. The current PPF interest rate effective from 1st January 2018 is 7.6% per annum (Compounded annually).

An individual can make a minimum, annual deposit of Rs 500, whereas a maximum amount of Rs 1.5 lakh can be deposited in a PPF account. Any amount exceeding the limit of Rs. 1.5 lakh in a financial year will not earn any interest. The amount can be deposited either in lump sum or in maximum of 12 monthly installments yearly. The maximum tenure of a PPF account is 15 years, which can be further extended to 5 years and the complete amount can be withdrawn after the completion of the maturity period.

It analyses the changes in interest rate and also the month in which the interest rate changes during a financial year. As a PPF account includes both tax benefit and loan facility so it is important to calculate the tax exemptions and permissible loan amount also.

Types of Public Provident Fund Calculators

There are 7 major types of PPF calculator which help investors with the 6 different types of calculations pertaining to PPF.

1. PPF Fixed Monthly Investment Calculator

This calculator helps investors to estimate their payable amount when investing in PPF on a monthly basis. To calculate the monthly interest amount, an individual is required to provide the month and financial year of opening the PPF account and the fixed monthly deposit. Just submit these details and the result will show the payable amount.

2. PPF Fixed Yearly Investment Calculator

This calculator helps the investors to compute their payable amount when investing in PPF on yearly basis. However, the PPF interest rate keeps changing on a quarterly basis, the major detail that needs to be filled is the financial year when PPF account was opened and the fixed annual investment/deposit.

3. PPF Variable Yearly Investment Calculator

This calculator requires investors to enter some basic information which includes the financial year of opening the PPF account and the amount deposited per annum.

4. PPF Benefit Calculator

The PPF benefit calculator includes various elements like fixed yearly contribution, the age of the investor, and the prevailing rate of interest of that year. Once an individual provides all the details, the PPF benefit calculator calculates the tax-free income, income tax liability before and after investment, yearly tax saving and overall tax saving in 15 years.

5. PPF Loan Calculator

The PPF loan calculator computes the approved loan amount. To calculate the loan amount, one just needs to enter the balance in the account.

6. PPF Withdrawal Calculator

Pre-mature PPF withdrawals are allowed after the completion of seven financial years from the year of opening the account. One can calculate both the amount of withdrawals, before and after extension with the help of PPF withdrawal calculator.

7. PPF Maturity Calculator

This calculator simply helps the investors to calculate the time of maturity of the PPF account.

While it’s great to have access to these calculators, it’s always good to have a working knowledge of how the total PPF balance is calculated at the end of a financial year. So, let’s take a look at two different cases to determine the difference your method of investing makes to your PPF returns.

Case 1: Mr. Bose invests Rs 90,000 as a lump sum on 1st April in PPF.

Interest calculation – Rs. 90,000/12 = 7,500 * 7.6% = Rs. 570

Total Interest accrued at the end of the year in Mr. Bose’s PPF account will be Rs. 6840

Total PPF balance at the end of the financial year in Mr. Bose PPF account will be Rs. 96, 840 (Rs. 90,000 + Rs. 6,840)

Case 2: Mr. Sarkar invests Rs 7,500 (Rs 7,500*12= Rs 90,000) under PPF before the 5th of each month.

Interest Calculation- Rs. 7,500*7.6% = Rs. 570

Total Interest accrued at the end of the year in Mr. Sarkar PPF account will be Rs. 6840 (Rs. 570*12)

Total PPF balance at the end of the financial year in Mr. Sarkar PPF account will be Rs. 96, 840 (Rs. 90,000+ Rs. 6,840)

Case 2: Mr. Sarkar invests Rs 7,500 (Rs 7,500*12= Rs 90,000) under PPF after the 5th of each month.

Interest Calculation- Rs. 7,500*7.6% = Rs. 570

Total Interest accrued at the end of the year in Mr. Sarkar PPF account will be Rs. 6270 (Rs. 570*11)

Total PPF balance at the end of the financial year in Mr. Sarkar PPF account will be Rs. 96, 270 (Rs. 90,000+ Rs. 6,270)

Conclusion

So, with the help of these examples, one can conclude whether he/she should invest annually or monthly under the PPF account. The interest calculation in PPF account is very simple. Moreover, with the help of PPF calculator, one can also know the right time to invest in PPF in order to avail maximum return.