Public Provident Fund Calculator

What Is PPF?

Public Provident Fund (PPF) is one of the most popular investment options in India. It is a long-term investment product managed by the Central Government, making it a safe choice for everyone. It has a 15-year lock-in period that allows your money to grow into significant wealth over the long run.

It is mainly popular due to risk-free returns and tax benefits. The invested amount and the maturity benefit of PPF both are tax-exempted, making it an attractive option.

You can put a minimum of ₹500 and a maximum of ₹1.5 lakhs in the PPF account during a financial year. Moreover, the current rate of interest offered on PPF is 7.1%.

However, before investing in this instrument, it is advisable to use a PPF calculator online and get a clear idea about the expected returns. This article covers everything you must know about the calculator.

What Is PPF Calculator?

To calculate the potential return from a PPF, you must consider various factors. Determine how frequently you want to invest, how much you can deposit in the account, and if you wish to stay invested after the lock-in period.

All these aspects can make the calculation rather tricky and time-consuming. And this is when the PPF calculator comes to your rescue.

The rate of interest on PPF is periodically determined by the Central Government. The calculator considers the rate of interest prevalent at the time of investment and provides you with the result accordingly.

In simple words, it is a tool that will tell you how much profit you can generate by investing in PPF.

How the PPF Calculator Can Help You?

PPF can be confusing, especially for first-time investors. The calculator makes it easy for everyone to keep an eye on their account balance and growth. It can also help resolve your queries about the changing interest rates or how they affect your maturity value.

The tool accurately calculates your potential profit and shows you the data within seconds.

The best thing is that you only need to provide some basic information such as deposit amount, investment frequency, and tenure. Thereafter, you can automatically see the current PPF interest rate on the calculator. This makes the calculations quick and easy for you.

Formula and procedure used for calculating the PPF interest

PPF offers compound interest, which is calculated on the available balance annually. The formula has different components:

F: Maturity benefit

P: Annual installments

n: Number of years

i: Interest rate/100

The PPF formula: F = P x [({(1+i) ⁿ} - 1)/i]

Let us understand this with an example. Suppose you invest ₹1 lakh to the account every year for 15 years, and the rate of interest is 7.1%.

Using the above formula, your estimated maturity amount is: 1 lakh x [({(1+i)¹⁵}-1)/i] = ₹31,17,276.

How to use PPF Calculator?

The latest PPF calculator 2020-21 is easy to use. Check out the below instructions to get the result quickly.

1. Frequency of Investment

This is generally the first step to follow. There are 4 options under this section: Monthly, Quarterly, Half-Yearly, and Yearly. You may choose one based on how often you want to invest in the PPF account in a financial year.

2. Deposit Amount

Under this option, you must enter your preferred investment amount for the payment frequency you chose earlier. You may invest up to ₹1.5 lakhs a year.

3. Current PPF Balance

This section is for those who already have an accumulated balance in the PPF account. If you are investing for the first time, leave it blank, it will show ₹0. Otherwise, mention the balance amount you have.

4. Duration of Investment

You will find a slider under this section that ranges from 15 years to 70 years. You can adjust it depending on your preferred investment term. After selecting the tenure, the calculator will automatically determine the estimated returns based on your inputs and the current rate of interest offered by the government. On the left side of the calculator, you will find the amounts for the total investment made, total interest earned, and the maturity value.

How PPF is Calculated?

The return on your account balance is calculated monthly based on the interest rate offered in that quarter. But the PPF credits the interest earned during a financial year only when the year ends. For the monthly calculation, the lowest amount recorded in your account from the 5th day of a month to the last day of that month is considered.

Suppose your PPF balance on 1st April 2021 is ₹10,000, and you deposit another ₹30,000 on 3rd April 2021. In this scenario, the interest will be calculated on ₹40,000. But, if you deposit ₹30,000 on 6th April 2021, the interest will be calculated only on ₹10,000.

Also, PPF offers compound interest on your balance. So, at the end of each year, the interest is calculated on your total balance (principal amount and the interest already earned). Moreover, you may remain invested in the PPF after the lock-in period even without making additional deposits. You will still receive annually compounded returns on the balance amount.

Advantages of PPF Calculator

The calculator serves many purposes, making it a helpful tool for both new and experienced investors. Here are five ways the calculator can help you.

1. Resolves queries

If you are unsure of how PPF works, the calculator can help. When you input different figures on the tool, you can see how it works. If you have any queries about PPF, the results generated on the calculator will help resolve them.

2. Helps make investment decisions

PPF does not require a fixed investment amount. You may choose the sum and investment frequency depending on your comfort. When you provide the required information, it shows the return you can expect at the end of 15 years. You can make investment decisions based on that.

3. Can be used multiple times

There is no limit to how many times you can use the PPF account calculator. So, you can try out different investment amounts and frequencies multiple times. This way, you will be able to figure out how much to invest to get your desired return.

4. Error-free results

Manual calculations always leave room for human errors, especially if you have to do it frequently. The calculator is an automated tool that eliminates the possibility of errors and provides precise data every time.

5. Helps with tax planning

PPF is a tax-saving investment product. So, you may use the calculator when planning your taxes to determine how much you can save by putting your money in PPF. You can strategize your investments accordingly.

6. Reflects wealth accumulation period

PPF allows you to continue investing even after the lock-in period. So, if you are planning long-term investments for wealth creation, you can use the calculator to check potential growth beyond the initial 15 years.

Recent PPF interest rates

The PPF interest rates change every quarter. These are linked to the ten-year government bond yield. Check out the below table to see how the rate changed over the last two financial years.

FAQs related to PPF calculator

1.  How does the PPF calculator help?

The PPF interest calculator is an online tool that helps determine how much profit you can generate by investing in PPF. Once you enter the investment amount, frequency, and tenure on the calculator, it will show you the amount of interest and total returns you will earn at maturity.

2. Is the PPF calculator free?

Yes, the calculator is free of cost, and there is no limit to how many times you can use it.

3. How accurate is the PPF calculator?

The calculator is an automated tool that uses the data provided by you to determine the maturity amount with 100% accuracy. The possibility of error is nil as the process is computerized.

4. Is it possible to use the PPF calculator for an investment tenure of more than 15 years?

The calculator has the option to choose an investment tenure between 15 and 70 years. If you want to continue investing after the initial lock-in period of 15 years, select the tenure accordingly. The calculator will display the estimated maturity amount based on the information provided by you.

5. Why is there no option to provide the interest rate on the PPF calculator?

PPF interest rates are determined by the Central Government at the beginning of every quarter. These are based on the average government bond yield in the last three months. The calculator automatically uses the latest rate of interest to provide the most up-to-date result. The current PPF interest rate for the April to June 2021 period is 7.1%.