Tax-saving schemes like PPF are widely used by investors who are looking to reduce their tax burdens. In addition to tax savings, PPF is a great choice for building a retirement corpus, as evident from the PPF interest rates history.
We’ll take a closer look at how PPF interest rates are calculated before we reveal the tips to maximize your returns.
How is PPF Interest rate Calculated?
The PPF interest calculator is not fixed but depends on the current yield of government bonds. Interest is compounded annually, so the interest is not distributed but reinvested along with your contribution. Upon completion of your contribution year, interest is credited to your account. The key point here is that while interest is credited into your account annually, interest is calculated every month as well. A month’s interest is calculated based on your lowest balance between the 5th and the last day of the month.
For the fourth quarter of 2018, from January 2019 to March 2019, the PPF interest rate is 8.0%.
Tips to Maximize your PPF Interest Earnings
Tip #1: Make your monthly investments before the 5th
In the case of monthly contributions to your PPF account, investing before the 5th will help you earn maximum returns, in contrast to investors who invest after the 5th, as interest rates are calculated monthly and compounded. By investing before a month’s interest calculation date, you maximize your returns.
Tip #2: Invest lump sums at the beginning of the financial year
PPF account interest rates are calculated from April to March every year, so investing bulk amounts at the beginning of the financial year is another way to maximize your interest rates. You can earn interest for your one-time deposit for the whole year if you deposit a large sum before the 5th of April.
Tip #3: Set up an online transfer PPF account with a bank that offers it
The PPF is a long-term investment plan, and to maximize its benefits, you need to stay invested consistently. You are more likely to skip instalments if you have no other option than to make cash contributions to your PPF Account at your bank or post office.
When your bank offers direct Internet Banking transfers to your PPF account, you are more likely to make regular contributions, improving your chances of maximising returns.
In the long-run, even a few hundreds earned every month can go a long way in maximising your PPF returns. Make use of the strategies listed here to maximize your interest.
Online PPF interest rate Calculation
Using a PPF interest calculator will help you determine how much interest your contributions earn accurately. It gives you a clear picture of the returns, allowing you to adjust your contributions to meet your specific needs. This is a handy tool that helps you predict the interest rates your contributions will earn.