PPF Interest Rate

PPF Interest Rate 2025

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Public Provident Fund (PPF) is one of India’s most trusted long-term savings schemes. It was introduced in 1968 by the National Savings Institute which comes under the Ministry of Finance. PPF remains a preferred choice for risk-averse investors aiming to build a substantial corpus for retirement or other financial goals.

PPF Interest Rate 2025

As of the first quarter of the financial year 2025-26 (April to June 2025), the PPF interest rate is 7.1% per annum, compounded annually. The Ministry of Finance, Government of India, has kept the interest rate unchanged from the previous quarter (January to March 2025). The interest rate is reviewed quarterly and it may change in subsequent quarters of 2025 based on economic factors and government policy.

How PPF Interest is Calculated

  • Basis of Calculation: Interest is calculated monthly on the lowest balance in the PPF account between the 5th and the last day of each month. To maximize interest, deposits should be made on or before the 5th of each month. For lump-sum annual deposits, contributing before April 5 ensures the entire amount earns interest for the full year.

  • Compounding: Interest is compounded annually and credited to the account on March 31 each financial year. This compounding effect significantly boosts returns over the 15-year tenure.

  • Example: If you invest ₹1.5 lakh annually (the maximum limit) at 7.1% for 15 years, the maturity amount would be approximately ₹40.68 lakh, including ₹18.18 lakh in interest. Extending the account for another 5 years with continued contributions could grow the corpus to around ₹66.58 lakh.

Historical PPF Interest Rate Trends

The PPF interest rate has seen a gradual decline over the past decade, dropping from 8.7% in 2015 to 7.1% in 2025. This reflects adjustments to align with broader economic conditions, such as inflation and government borrowing rates. Despite the decline, PPF rates remain competitive compared to other fixed-income instruments like bank fixed deposits, especially due to their tax-free returns.

Year

Interest Rate (% p.a.)
2015 8.7
2018 7.6
2020 7.1
2023 7.1
2025

7.1 (Q1 FY 2025-26)

Key Features of PPF

  • Tenure: Minimum 15 years, extendable in blocks of 5 years with or without further contributions.

  • Deposit Limits: Minimum ₹500 and maximum ₹1.5 lakh per financial year, in up to 12 installments or a lump sum.

  • Eligibility: Any Indian resident can open one PPF account in their name or on behalf of a minor. Non-Resident Indians (NRIs) cannot open new accounts but can maintain existing ones until maturity. Also only one account per individual is allowed.

  • Tax Benefits: PPF falls under the Exempt-Exempt-Exempt (EEE) category:

    • Contributions up to ₹1.5 lakh are deductible under Section 80C of the Income Tax Act.

    • Interest earned is tax-free.

    • Maturity proceeds are tax-free.

  • Loan Facility: Loans are available from the 3rd to 6th financial year, up to 25% of the balance from two years prior.

  • Partial Withdrawals: Allowed from the 7th financial year, capped at 50% of the balance from the preceding year or fourth year, whichever is lower.

  • Premature Closure: Permitted after 5 years for specific reasons like medical emergencies or higher education, subject to a 1% interest rate penalty.

  • Nomination: Account holders can nominate one or more persons, specifying shares. Nominees receive the balance in case of the account holder’s demise, but cannot make contributions.

Benefits of Investing in PPF

  1. Government-Backed Security: It is fully guaranteed by the Government of India which ensures zero risk to the principal and interest.

  2. Tax-Free Returns: The EEE status makes PPF one of the most tax-efficient investment options.

  3. Long-Term Wealth Creation: The 15-year lock-in encourages disciplined savings, and compounding leads to significant growth.

  4. Flexibility: Options to extend the account, take loans, or make partial withdrawals provide liquidity when needed.

  5. Low Entry Barrier: With a minimum deposit of ₹500, PPF is accessible to a wide range of investors.

How to Open a PPF Account

PPF accounts can be opened at:

  • Post Offices: Designated branches offer PPF accounts.

  • Banks: Public sector banks (e.g., SBI, PNB) and select private banks (e.g., ICICI, HDFC) provide PPF accounts. The interest rate and features are uniform across all institutions.

  • Online: Many banks allow online account opening through internet banking, requiring KYC documents like Aadhaar, PAN, and address proof.

Documents Required:

  • Identity proof (Aadhaar, PAN, Voter ID)

  • Address proof

  • Passport-size photograph

  • Nomination form

PPF Calculator: Estimating Returns

A PPF calculator is an online tool that estimates maturity value and interest earned based on:

  • Annual or monthly deposit amount

  • Investment tenure (15 years or extended)

  • Prevailing interest rate (7.1% for 2025 Q1)

Example Calculation:

  • Input: ₹1 lakh annual deposit, 15 years, 7.1% interest.

  • Output: Maturity amount ≈ ₹27.12 lakh, with ≈ ₹12.12 lakh as interest.

Calculators are available on bank websites (e.g., SBI, HDFC, ICICI) and financial platforms like ClearTax and Paisabazaar. They help investors plan contributions to meet financial goals.

Frequently Asked Questions (FAQ)

Q1: What is the current PPF interest rate for 2025?
A: The PPF interest rate for April to June 2025 (Q1 FY 2025-26) is 7.1% per annum, compounded annually. It is subject to quarterly review by the government.

Q2: Is the PPF interest rate fixed for the entire 15-year tenure?
A: No, the interest rate is reviewed quarterly by the Ministry of Finance and may change. Historically, it has ranged from 7.1% to 8.7% over the past decade.

Q3: How is PPF interest calculated?
A: Interest is calculated monthly on the lowest balance between the 5th and last day of the month, compounded annually, and credited on March 31. Deposits before the 5th maximize interest.

Q4: Is PPF interest taxable?
A: No, PPF interest is completely tax-free under the EEE status. Contributions up to ₹1.5 lakh are also deductible under Section 80C, and maturity proceeds are tax-exempt.

Q5: Can I open a PPF account online?
A: Yes, many banks like SBI, HDFC, and ICICI allow online PPF account opening through internet banking, provided you complete KYC requirements.

Q6: What happens if I miss a yearly deposit?
A: The account becomes inactive if the minimum ₹500 annual deposit is not made. It can be reactivated by paying ₹500 for each missed year plus a ₹50 penalty per year.

Q7: Can NRIs open a PPF account?
A: NRIs cannot open new PPF accounts. However, if a resident becomes an NRI, they can continue contributing to an existing account until maturity but cannot extend it.

Q8: Can I withdraw money from my PPF account before maturity?
A: Partial withdrawals are allowed from the 7th financial year, up to 50% of the balance from the preceding or fourth year, whichever is lower. Premature closure is permitted after 5 years for specific reasons with a 1% interest penalty.

Q9: Can I take a loan against my PPF account?
A: Yes, loans are available from the 3rd to 6th financial year, up to 25% of the balance from two years prior. The loan must be repaid within 36 months to avoid higher interest rates.

Q10: What happens to a PPF account after the account holder’s death?
A: The account is transferred to the nominee(s), who can withdraw the balance but cannot make further contributions. The account continues to earn interest until closed.

For more visit – https://www.nsiindia.gov.in/(S(oyk3epbrtpfxo045wwu1kbvz))/InternalPage.aspx?Id_Pk=55

Also visit ; https://postofficefd.com/icici-bank-savings-account-interest-rates/

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