What is Public Provident Fund?
Retirement planning is one of the key elements of financial planning these days. Everybody wishes to have enough money at their disposal so that they can enjoy retirement without any financial worries. The best way to plan financially for retirement is by investing money regularly in an investment instrument that offers generous return and is also risk-free. Public Provident Fund or PPF is one such investment option that fits the desired category and is considered as an ideal retirement savings plan by many.
PPF allows individuals to invest periodically in their PPF account. The scheme offers a fixed rate of interest and brings tax benefits as well. Calculating returns from PPF investments beforehand is necessary as it helps you to estimate how your investment approach will be based on your retirement plans. Such calculations can be tricky and time consuming, hence, doing manual calculations will not be a wise thing to do. A PPF calculator solves the problem of calculating interest from the PPF account and enables you to estimate the corpus at the time of maturity.
How to Calculate PPF Returns?
The returns from PPF depends on the amount of contribution you make, time period of investment, and the offered PPF account interest rate. The formula for calculating returns from PPF investment is as follows:
Where,
F = Final value of the maturity
P = Value of annual investments
n = Number of years of investment, i.e. PPF maturity period
i = Offered PPF rate of interest
Let us understand this with an example:
Suppose you wish to invest Rs 2 lakhs every year in your PPF account for 15 years, and the rate of interest is 7.1%.
By the time of maturity, the value of your total corpus will be Rs 54,24,279, against a total investment of Rs 30,00,000. This means that the interest earned will be Rs 24,24,279.
The above table itself shows how complicated and time consuming the calculation is. Furthermore, since each of the values in the aforementioned table is linked with its previous value, even a minor error will give completely wrong results. However, using PPF return calculator or PPF maturity calculator will solve all the issues.
