Public Provident Fund (PPF) is a long-term investment scheme with 15 years of lock-in period. The scheme is backed by the government and, hence, is safe to invest in.

PPF comes under the Exempt-Exempt-Exempt tax benefit- the invested amount, interest earned, and maturity amount are all tax-free.

The scheme comes with an annual interest rate which may or may not change every year. The current interest rate on the PPF is 7.10% p.a.

Note: The interest rate on PPF is declared every financial year by the government of India.

You can create a PPF account in a bank or a post office. The scheme expects you to invest at least INR. 500 in a financial year. You can invest any amount in your PPF account either monthly/quarterly/annually. However, the interest earned on up to INR. 1,50,000 of the contribution amount will be exempt from the tax.

Salaried individuals, as well as freelancers, can benefit from the PPF scheme. Read more about PPF here.

PPF calculator is designed to calculate the effect of compounding on the invested amount. Since the current rate of interest is 7.10% p.a., VNN Wealth’s calculator will compound your yearly investment and produce an estimated maturity value.

The PPF calculator uses the following formula-

F = P [({(1+i) ^n}-1)/i]
Where,
F= Maturity value
P= Annual Investments
i= Rate of Interest (May or may not change every financial year)
n= Total number of years.

Let’s say, you’re investing INR. 1,50,000 in your PPF account every year for the tax benefit.

Your total investment will be INR. 22,50,000, you’ll earn INR. 18,18,209 as interest income (assuming @ 7.1 p.a. as interest rate fixed for 15 yrs), taking the maturity amount to INR. 40,68,209.

Please note that you have the option to continue your PPF investments after 15 years by extending the scheme in 5-year slots indefinitely.

PPF calculator calculates compound interest on your annual investments over 15 years. You can get an idea of the estimated maturity amount and invest accordingly.

If you’re a salaried individual, you may have more than one investment qualifying under section 80C of the IT Act. In such a case, you can treat PPF as a wealth generation scheme rather than a tax-saving scheme. Or you can divide your investments across 80C instruments.

Get a sense of the maturity amount based on your PPF contributions using the above PPF calculator. Make sure you’re effectively utilizing the scheme.

Also, read- when is the right time to invest in PPF?