Public Provident Fund account: Introduced in 1968 under the National Savings Institute of the Finance Ministry, the Public Provident Fund (PPF) scheme was brought in to promote long-term savings and investments for retirement planning. Considered as a prudent financial instrument for individuals averse to high-risk investments, the PPF scheme offers a blend of security, reasonable returns, and tax benefits, making it an attractive option for those seeking a reliable avenue for building a retirement corpus.
Since the plan is mandated by the government, it is backed up with guaranteed returns to protect the financial needs of the common investors. Further, invested funds in the PPF account are not market-linked either. Investors can also undertake the PPF regime to diversify their financial and investment portfolios. At times of downswing of the business cycle, PPF accounts can provide stable returns on investment annually.
The current Public Provident Fund Interest Rate (PPF) stands at 7.1%, compounded yearly for the April-June 2024 quarter. The interest rate of PPF has remained at 7.1% since April 2020.
However, it is worth noting that there was a time when this scheme provided a significantly higher interest rate of 12%. During this period, the deposit limits were set at Rs 40,000 for two years and Rs 60,000 for approximately 12 years.
Interest rate
When the scheme started in 1968, the PPF interest rate was just 4.8% while the maximum investment limit was just Rs 15,000. The historical data on Public Provident Fund (PPF) interest rates indicates that from 01.04.1986 to 31.03.1988 and 01.04.1988 to 14.01.2000, the interest rate stood at 12%. Subsequently, between 15.01.2000 to 28.02.2001, the interest rate decreased to 11%.
In the last decade, the PPF interest rate fluctuated between 7.1% and 8.8%. Notably, it peaked at 8.80% from 01.04.2012 to 31.03.2013.
Following this, the interest rate remained at 8.7% from 01.04.2013 to 31.03.2016. However, during 01.04.2013 to 31.03.2014, the PPF deposit ceiling was restricted to Rs 1 lakh, which later increased to Rs 1.5 lakh starting from 01.04.2014.
For the Q2 FY25, the interest rate was kept unchanged at 7.1%. The tenure of the investment tool is 15 years.
Interest rates since 2000s
Year Interest rate Max amount
01.04.1999 to 14.01.2000 12 60000 15.01.2000 to 28.02.2001 11 60000 01.03.2001 to 28.02.2002 9.50 60000 01.03.2002 to 31.03.2002 9.00 60000 01.04.2002 to 28.02.2003 9 70000 01.03.2003 to 31.03.2011 8 70000 01.04.2011 to 30.11.2011 8 100000 01.12.2011 to 31.03.2012 8.60 100000 01.04.2012 to 31.03.2013 8.80 100000 01.04.2013 to 31.03.2014 8.70 100000 01.04.2014 to 31.03.2016 8.70 150000 01.04.2016 to 30.09.2016 8.10 150000 01.10.2016 to 31.03.2017 8 150000 01.04.2017 to 30.06.2017 7.90 150000 01.07.2017 to 30.09.2017 7.80 150000 01.01.2018 to 30.09.2018 7.60 150000 01.10.2018 to 30.06.2019 8.00 150000 01.07.2019 to 31.03.2020 7.90 150000 01.04.2020 to 30.09.2020 7.10 150000 01.10.2022 to 31.12.2022 7.10 150000 01.01.2023 to 31.03.2023 7.10 150000 01.04.2024 to 30.6.2024 7.10 150000 01.07.2024 to 30.9.2024 7.10 150000
Taxability of PPF
Public Provident Fund (PPF) is a highly effective tax-saving investment product that falls under the triple tax exemption category, commonly known as Exempt-Exempt-Exempt (EEE). This implies that tax benefits are availed at three crucial stages: investment, accrual, and withdrawal.
One of the primary advantages of PPF is its eligibility for deductions under Section 80C of the Income-tax Act, 1961. Investors can claim deductions on investments of up to Rs 1.5 lakh per financial year. Moreover, the interest earned on the PPF account enjoys tax-exempt status.
Moreover, upon maturity, the accumulated amount from the PPF account can be withdrawn tax-free, extending the realm of tax benefits. This tax exemption encompasses both the principal invested amount and the interest earned. These significant tax advantages make PPF a preferred investment avenue for individuals seeking to optimize tax savings while nurturing their financial security.
Investment amount
A minimum of Rs. 500 and a maximum of Rs. 1.5 Lakh can be invested in a provident fund scheme annually. This investment can be undertaken on a lump sum or installment basis. However, an individual is eligible for only 12 yearly installment payments into a Public Provident Fund (PPF) account.
How to open a PPF account
Investors can open accounts both offline and online. Activating PPF online can be done by visiting the portal of a chosen bank or post office.
The following documents are required for a public provident fund account –
> KYC documents: Aadhaar, Voter ID, Driver’s License > PAN card > Residential address proof > Form for nominee declaration > Passport sized photograph