Public Provident Fund or PPF as its popularly known as has been a household name among Indian investors and savers over the years. Even then it’s as good a time as any to remind ourselves , especially with retirement on our minds, of the good things that PPF does for our finances. Read about it in the article below. Team RetyrSmart
How PPF helps you save taxes and provide in your retirement
When it comes to saving taxes, the Public Provident Fund (PPF) is one product a lot of people turn to. There are two reasons for this: its tax-free yearly interest and the annual compounding. Since the PPF has a long tenure of 15 years, the impact of compoundin is huge, especially in the later years. Further, because the interest earned is backed by sovereign guarantee, it makes it a safe investment. Therefore, linking one’s investment in PPF to a long term goal such as retirement helps.
Here’s how to go about it.
Earnings in PPF
The interest rate on PPF is set by the government every quarter based on the yield (return) of government securities. In 1968-69, PPF offered a 4 per cent per annum interest, while from 1986-2000 it offered 12 per cent. The current interest rate for April 1 to June 30, 2018 remains unchanged as the previous quarter at 7.6 per cent per annum. As the interest is tax-free, the effective pre-tax yield for someone paying tax at 5.15 per cent, 20.6 per cent and 30.9 per cent rates, will be 8 per cent, 9.57 per cent and 11 per cent per annum, respectively.