Public Provident Fund interest rate is stuck since 2020. Can it still make you a crorepati?
The interest rate for Public Provident Fund (PPF) scheme is stuck at 7.1% since April 1, 2020. While the Government has revised the interest rates of several small savings schemes in three years, it has kept the PPF interest rate unchanged.
In past, the average PPF interest rate was around 8%. Even as the current interest rate on PPF deposits is low, the guarantees and tax benefits provided in this scheme make it one of the best long-term investing options for investors looking at assured returns and tax savings.
The tax benefits under PPF are unmatched. Not only investment up to Rs 1.5 lakh in PPF qualifies for deduction under Section 80C of the Income Tax Act but the interest earned and the amount withdrawn on maturity are also exempted from taxation.
It is estimated that at the current interest rate of 7.1%, the effective interest for individuals in the 31.3% tax bracket works out to be 10.32%. This is also believed to be one of the reasons why the PPF interest rate has not been increased by the Government while other small savings schemes like SCSS, NSC, SSY and KVP are now offering higher annual returns.
Also Read: PPF interest rate history: When Public Provident Fund deposits earned 12% interest!
As PPF is a long-term investment solution, you may be wondering how much money you can accumulate by making full use of the scheme. Let’s have a look.
The PPF scheme allows a maximum investment of Rs 1.5 lakh per year. The final amount that you can accumulate through this scheme will depend on three factors:
Interest rate: Like all other small savings schemes, the PPF interest rate is also subject to quarterly revision by the Government. So the interest rate of this scheme may go up or down in future.
Investment duration:
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