Examples of Calculating PPF Interest
Example 1:
Let’s consider an example of a PPF account over an 1 year:
- PPF Account Opening Balance: ₹1,00,000
- Annual PPF Interest Rate: 7.1%
Solution:
Step 1: Calculate interest for the year using the formula,
Interest on PPF =
Step 2: Add the interest earned to the principal balance:
New PPF Balance = ₹1,00,000 + ₹7,100 = ₹1,07,100
This new balance will be considered as the opening balance for the next year, and the process repeats.
Example 2:
Let’s consider an example of a PPF account over an 8-year period:
- Initial PPF Account Balance: ₹1,00,000
- Annual PPF Interest Rate: 7.1%
Solution:
Calculating interest for each year using the formula,
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|
Interest |
₹8,142.71 |
₹8,718.92 |
₹9,337.13 |
₹10,009 |
₹10,712.84 |
₹11,479.90 | ||
New PPF Balance |
₹100,000 + ₹7,100 = ₹107,100 |
₹107,100 + ₹7,601 = ₹114,701 |
₹1,22,844 |
₹1,31,563 |
₹1,40,900 |
₹1,50,909 |
₹1,61,622 |
₹1,73,102 |
So, after 8 years, the PPF account balance would be approximately ₹1,73,102.
How PPF Interest is Calculated?
The Public Provident Fund (PPF) is a popular long-term investment scheme in India, offering attractive interest rates and tax benefits. But have you ever wondered exactly how the interest on your PPF contributions is calculated? This article will delve into the nitty-gritty of PPF interest calculations, making it easier for you to understand how your money grows in this scheme.