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How to Calculate PPF 

What is PPF?

PPF, or Public Provident Fund, was introduced in India in 1968. It is one of the most popular government-backed saving schemes because it is safe and offers several benefits with guaranteed returns. A PPF account can be used to build a retirement corpus and save taxes. It has a maturity period of 15 years, which is extendable based on your requirements. 

When you invest in PPF through multiple contributions, you would want to know how much your money will grow during the investment period. The information below can help you learn how to calculate PPF manually or use a PPF calculator for quick and accurate results. 

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How does PPF work?

A PPF account is a savings-cum-tax savings investment vehicle. It has a lock-in period of 15 years and allows you to invest any amount in the range of Rs. 500 to Rs. 1.5 lakh in a financial year. The scheme falls into the Exempt-Exempt-Exempt (EEE) category, which means the returns are tax-free. Through small and frequent contributions, the account enables you to build a corpus for long-term goals like retirement, a child’s higher education, or marriage. 

The savings scheme offers guaranteed returns, calculated at an interest rate of 7.1%, compounded annually at the end of the financial year. The PPF interest rate, maturity, taxation, and withdrawal guidelines are laid down by the government. 

How to calculate PPF?

You can calculate the amount accrued on your PPF account with the following formula:

F = P[({(1+i) ^n}-1)/i]


F is the PPF maturity value

P is annual instalment

N is the tenure or number of years, and

I is the interest rate/100

To understand this with an example, you can assume the following:

You invest Rs. 1,00,000 annually in your PPF account for 15 years at the ongoing interest rate of 7.1%. 

F = 100000[({(1+0.071) ^15}-1)/0.071

The value of your PPF investment at the time of maturity will be Rs. 27,12,139.

How to calculate PPF using a PPF calculator? 

The PPF calculator is an easy-to-use and free tool. It produces accurate results within a few seconds, enabling you to make informed investment decisions. 

You can use it to compute the PPF maturity value. To proceed, fill out the tenure, deposit frequency, and investment amount. The current interest rate is provided by default for your information. 

The calculator will display the maturity value of your account in a few seconds. 

How to calculate the PPF interest rate?

PPF is backed by the Government of India, which determines the PPF interest rate. The current interest rate is 7.1%.

The calculation method for PPF interest is based on the concept of compound interest. It is computed every month on the lowest balance in the PPF account after the 5th of every month to the last day of the month. The interest is compounded annually and added to the PPF account when the financial year ends. 

Points to remember for PPF calculation

You must keep the following points in mind for ease of calculation. 

  1. The minimum amount you can deposit in the PPF account is Rs. 500 annually. 
  2. The maximum you can deposit to your PPF account is Rs. 1.5 lakh yearly. 
  3. The interest is compounded annually at the end of the financial year. 
  4. The PPF account matures after 15 years, and the returns are tax-exempt.
  5. The Finance Ministry can announce amendments to the PPF interest rate every quarter. 

Summing up

PPF is a small savings scheme that can help you build a solid retirement corpus. You can use it to build a steady corpus, save tax, and plan for several financial goals. Since PPF is a government-backed scheme, it offers a fixed rate of return. However, it is important to remember that the value of your money will decrease over time due to inflation. You can use an inflation calculator to see how much your PPF corpus will be worth in real terms in the future. This will help you determine how much you need to invest each month to reach your retirement goals. However, since the PPF account is a collection of multiple contributions, you may feel confused about how to calculate the PPF maturity value. You can use the standard formula for manual calculations or take the assistance of the PPF calculator for instant and error-free results. 


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