PPF Investing – Here’s How to Calculate your Returns on Investments

For investors who are wary of taking higher risks, the Public Provident Fund (PPF) is one of the top investing choices. This government-sponsored savings program was established primarily for the advantage of small investors. PPF offers returns and tax advantages because it falls in the Exempt-Exempt-Exempt (EEE) group of income tax regulations.

PPF investors frequently wish to know how much growth they can expect from their investment. The computations for the same can be challenging. A PPF calculator can be helpful in this situation. For example, an investor can quickly assess their annual PPF returns from periodic payments made to a PPF account over a predetermined time using the PPF calculator.

The most attractive feature of a PPF calculator is that it eliminates the need for different bank-specific calculators because the government controls interest rates, maturity dates, withdrawal policies, and taxation.

How to use the PPF calculator?

Investors must enter the data set mentioned below into the PPF calculator:

1. Investment Amount

You should enter the deposit amount per installment here. For instance, your annual deposit is INR 6,000 and you make a one-time investment per year. You need to specify the frequency of investment as yearly after entering the deposit amount. Consider that you make the same annual investment but in equal monthly installments of INR 500. You should then enter your investment amount as INR 500 and specify the frequency of investment as monthly.

2. Duration

Select the time frame in years during which you will invest in PPF.

3. Interest Rate

You already have the current interest rate set by the government. The PPF calculator provides fast information regarding the PPF maturity amount, PPF interest generated, and the total PPF investment after receiving the data you entered.

The formula for the calculation of the Public Provident Fund’s maturity amount is as follows:

M = P [ ( { (1 + t) ^ n } – 1 ) / i ] x ( 1 + i )

Where:

P = Annual Investment Amount

M = Maturity Value

i = Interest Rate

n = Number of years

The annuity factor, which appears in the formula following the letter P, is multiplied by the annual contribution to provide the maturity value of the PPF investment. Let’s use the following information as an example to determine the maturity value of a PPF account:

• Annual Contribution = INR 1 lakh
• PPF Account Interest Rate = 7.1%
• Number of Years = 15 years

Let’s plug the information into the PPF calculation formula:

M = INR 1 lakh [ ( { (1 + 0.071) ^ 15 } – 1 ) / 0.071 ] x (1 + 0.071)

M = INR 27, 12, 139

How Can a PPF Calculator Help You?

A PPF calculator answers investors’ questions about their investment, much like any investment calculator. The calculator tracks the increase that can be obtained on the capital invested. Investors with PPF accounts are aware that interest rates can fluctuate each month. The ability to monitor shifting interest rates has improved. Account holders can quickly learn about monthly interest rate changes with a public provident fund calculator.

Basic rules for PPF calculation:

When computing PPF returns, the following guidelines must be followed:

1. The annual maximum investment amount is INR 1.5 lakh.
2. A PPF account must have a minimum annual investment of INR 500.
3. The interest is compounded annually at the end of each year.
4. PPF accounts have a 15-year maturity period, and the earnings are tax-free.
5. After the first 15-year term, you can renew it for additional terms in blocks of 5 years.
6. According to declarations from the Finance Ministry, PPF interest rates may fluctuate every three months.

Important factors related to PPF calculation

Investors need to be aware of the following significant PPF calculation-related factors:

1. The interest on PPFs is compounded annually.
2. Monthly calculations are used to determine interest earnings. This interest is credited at the end of the year.
3. To calculate interest, the lowest balance between the fifth and the last day of the month is used. Therefore, to receive interest for the current month, it is crucial to deposit your payments by the fifth of each month. Otherwise, the interest is calculated on the previous balance.
4. After the third year ends and until the end of the sixth year, investors may request a loan against their PPF. The loan amount that can be obtained is determined by the account opening date. The maximum loan amount is 25% of the PPF account’s initial balance for the prior year. No loans should have been taken out for the previous year. An investor cannot obtain a loan against PPF after the end of the sixth year from the PPF account opening date.
5. After finishing the sixth year or from the beginning of the seventh year, partial withdrawals are permitted. The lesser of the following amounts must be used as the maximum withdrawal amount:

• 50% of the amount in the account at the end of the preceding year, determined from the year in which the withdrawal is made.
• 50% of the account balance at the end of the fourth financial year immediately preceding the year when the withdrawal is made.

Benefits of using the PPF calculator

The following is the list of advantages of using an online PPF calculator:

1. It enables investors to understand the potential interest from a particular investment clearly.
2. Investors can also estimate a financial year’s tax savings through PPF.
3. Investors who struggle to choose the maturity time of their investment can also utilize the PPF calculator. Using the calculator, they can assess the time frame required to reach their maturity amount goals.
4. The calculator also estimates the total amount invested over a fiscal year.

Other Investment Alternatives

To expand your portfolio, it is always a good idea to consider various investment alternatives. Thus, your risk is reduced, and your rewards are maximized. You can make investments in safer options like fixed deposits and government bonds. Consider investing in stocks if you have a high-risk tolerance. One of the rapidly growing investment opportunities made possible by technology is P2P lending. In the Fractional Matchmaking Peer-to-Peer Plan from LenDenClub offers annual returns of up to 10–12%* p.a. on your investment.

Conclusion

PPF calculators can offer information on a variety of PPF investment-related topics. This makes it simpler for investors to make logical choices for proper long-term financial planning. Therefore, submitting appropriate information to receive correct data on predicted returns for your PPF investment is crucial.