PPF interest rate now at 8.6%

PPF interest rates was increased to 8.6% by govt recently.  This is good news for all the investors who are primarily debt instruments investors. The Public Providend Fund interest rate was 8% from very long time and the investment limit for PPF is increased to 1 lac from old 70,000 . This will be applicable from 1-12-2011 (source) . There are some other changes which were done in other investment products , which are

  • The Maturity tenure for National Saving Certificate (NSC) has been reduced to 5 yrs (earlier it was 6 yrs) and interest rates increased to 8.4% from 8%
  • A new National Savings Certificate (NSC) would be launched with a 10-year maturity with an annual interest rate of 8.7 per cent.
  • Post office savings account interest is increased from 3.5% to 4 per cent.
  • Interest on loans obtained from PPF will be increased to 2% p.a. from existing 1% p.a
  • Kisan Vikas Patra has been discontinued from now onwards . The committee had said that the KVP was a bearer-like certificate with a regulated premature closure facility and was open to abuse by tax dodgers. They can be bought or sold without going to the post offices.
  • Maturity period for Post Office Montly Savings Scheme (POMIS) has been reduced to 5 yrs and interest rate has been increased from 8% to 8.2%. Also the 5% bonus on maturity has been scrapped.
  • Commission for agents on PPF and Senior Citizens Savings Schemes are scrapped. For any other instruments, agents commission will now be 0.5% against 1% earliar . According to the Gopinath Committee, the agents were paid around Rs 2,400 crore commission in 2010-11.
  • The interest rates of varios tenures fixed deposits in Post Office is increased , for example for 1 yrs Fixed deposit , the new interest rates is 7.7% against 6.25% earliar . There are changes in other tenure fixed deposits also (See image above) . This has happened because interest rates on small saving instruments have been aligned with G-sec rates of similar maturity, with a spread of 25 basis points.

These measures are in sync with the recommendations of former RBI deputy governor Shayamala Gopinath committee that submitted its report to finance minister Pranab Mukherjee on June 7 this year.

Jayant Pai has an interesting comment on ppfas blog which goes like this

By now you must be aware that the interest rates on Government Small Savings Schemes (SSS) have been increased. Newspapers are going around town proclaiming that this is a bonanza for small investors. Well, it is true that soon (Most probably from December 1, 2011) you will be earning more by investing in these instruments but in a way this move is similar to the recent deregulation of bank savings account rates by the Reserve Bank of India .

You may be earning more today but this could change in the future. In other words, interest rates on all SSS will be dynamic and linked to the yield for comparable Government Securities although the rate changes will occur only once in a year and the relevant announcement will be made on April 1 each year. The Government will however ensure that a spread ranging from 25 to 50 basis points over the relevant benchmark security will be maintained.

Note that the news of PPF interest hike was published on Jagoinvestor news blog within few minutes of govt decision .

219 CommentsAdd Comment

  1. Saurav Sinha

    Detail info is available only here. Great job Manish.

    Seems with ELSS phasing out from next year after DTC comes in (most probably), PPF will be in Top 3 of investment list for most of us.

      • R Nandy

        I think PPF interest rate will be an issue now as the interest rate will be linked with RBI bond rate of 10 years+0.25%.So,interest rates will vary from 6-9% every year.I don’t think this is good for the investors as the average rate will be close to 7% over a 10 year period compared to 8% earlier.

        I think for employees like me who have the provision of investing in VPF can blindly put extra money in VPF rater than PPF as VPF/EPF returns will not come below 8.5% in the near future.It is 9.5% now

  2. Shobha

    Hey Manish,

    Good thing manish, read it first here….:-)

    Will be good for people more interested in Debt Instruments.

    Regards

    Shobha

  3. Kartheek

    Hi Manish,

    Though I read thru newspaper, I was waiting to see your comments on this.

    I think this will help a lot for safe investors. 1 Lakh savings per year will compound to 48 lakhs (pre-tax) after 20years.

    The NSC for 10 year maturity with 8.7% also sound good.

    Regards,
    Kartheek

    • Kartheek

      Yes , 20 payments , 1 lac per year will make around 48 lacs pre tax .. but as of now PPF is taxfree only , so if this same thing continues , you will not have to pay any tax later . But , one thing to note here is that PPF rates will not be 8.6% always .. it will undergo changes .

      Manish

  4. Eswar

    Hi Manish

    Its good to see that Govt has incresed the PPF rates.

    However I have a query. I am a PSU employee, in whcih current PF rate 9.5% p.a. We ahave a facility of increasing employee share (i.e. VPF) whcih will also attract the same 9.5% p.a. rate. Now tell me which one will be better for me: PPF or VPF?.

    • Eswar

      Provided that PF from companies takes some time to get and there are running around here and there at the end , I would say you can take PPF also for some part . Also why are you not investing in Mutual funds ?

      Mnaish

  5. Jeetu

    Dear Manish
    Its great news for all the small saving investors and conservative investors who believe in saving their funds in safe instruments.
    Good move by RBI.

      • Jeetu

        Oh… I was under impression that its RBI who took this decision.
        Wouldn’t it be great if RBI regulates the interest rate of Govt. Schemes and links it to market scenario? It can take care of inflation by that means.

        Your comments?

        Jeetu

        • Jeetu

          I am not sure . RBI is just a regulator and can take decisions regarding banking and interest rates . The investments products which are purely under govt like NSC , KVP , PPF , post office needs a deeper thoughts and finance minstry has to take decisions on that

          Manish

  6. A

    Is this interest rate applicable to the existing account holders of ppf or to the new investors only?since only one PPF account can be opened to a single person

  7. sanjay panchal

    On Website :
    I’ve found that all the investment in postbank is comming under 80C. So is it good to invest in post bank Monthly Income Scheme? If not then please suggest some other good options.

    Regards,

    Sanjay panchal

      • SANJAY PANCHAL

        Dear Sir,

        Thanks for reply,

        I’m 26year old unmarried man and my annual income is 5lac. I want to invest my hard earned money in such a way that I have to pay minimum TDS/incometax & I can get my money back with good return or minimum loss after 2 to 3 year when i will get married or i will buy home.

        I’ve studied abouf tax saver FD, PPF, Infrastructure bond, Insurance, MIS & RD but i’m confused because of locking period,premature closing conditions & loan availability on my savings.

        If you have good suggestion for me according to my requirement then please inform me.

        Thanks in advance

        SANJAY PANCHAL

        • Sanjay

          You are expecting very detailed explaintation of everything in a short place .,,. understanding things well will take time and a continued learning . Please ask specific questions which one can asnswer

          Manish

          • SANJAY PANCHAL

            Thanks you for reply. I’ve no question regarding this PPF updation. I’ve one question but I’ve already asked in an another post on this same subject.

  8. manish

    Hi, I have some doubt here.
    It’s mentioned that “interest rates on all SSS will be dynamic and linked to the yield for comparable Government Securities although the rate changes will occur only once in a year and the relevant announcement will be made on April 1 each year” .
    1)Practically how much interest rate variation will happen every year.
    2)Rate declared on 1st April 2012 will be for investment period 1st April 2011 -31st March 2012 or 1st April 2012 – 31st March 2013.

    Thanks,

  9. reddy

    Hi Manish,

    Is this increase of 1 lak in PPF means that I can invest 1 lak each one on my name and other on my child name(I will be the guardian since he is minor) which makes the interest on both accounts?

    What is the criteria in this case? will that limit for both accounts?

    • Suresh

      There is no “bank PPF” . there is only PPF .. when you open a PPF account at bank or Post office , they are all same , just that you are opening it from BANK or PO . So its same thing

      Manish

  10. Rakesh

    Manish,

    Very informative post. A welcome move my the Government. Most of the salaried class people will be benefit. Another good move is to reduce the term on post office MIPs. They should have also increased the interest to 8.5%. A lot of people (esp. senior citizens) invest in post office MIP.

    Rakesh

    • Bemoneyaware

      Welcome to India . PPF and other saving schemes are cheap source of money to Govt of India . Govt also raises money from market every year by issuing different kind of bonds and some times even loans . But those are not cheap sources for govt , so PPF and Post office money acts like a cheap source of money (compared to bonds and other things issued) . So govt pays the interest on it and still benefits from it.

      Manish

  11. Joy

    I wanted to know if the 5% final bonus for MIS run by Post Office is scrapped for new accounts or even for existing accounts. My 6 year term is getting over next year. Will I get a bonus. Also is the new rate of interest of 8.2% applicable to existing accounts or only for new accounts?

      • Deepak R Khemani

        The rates which have been announced will be for the new accounts opened AFTER the notification comes, As far as Bonus is concerned it is payable on maturity after the account completes its tenure of 6 years. If your account is maturing after 13-2-2012 there is NO bonus payable as the 10 % bonus was abolished on 13-2-2006 only to be reintroduced later at a reduced rate of 5%.

        • Vijay

          Deepak, MY MIS matures on 16 DEC 2011. Will I be getting 10 % bonus that was allotted to me when I opened it 6 yrs back on 16.12.2005?

          There is an article in times of india that says 5 % bonus has been scrapped for existing account holders also.

          Quote “There are some disappointments as well. The government is withdrawing Kisan Vikas Patra, on suspicion that this is being used for money laundering. It has also decided to do away with the 5% bonus that MIS customers got at the time of maturity. What is even more disappointing is that this withdrawal of bonus payout will be applicable even on old accounts that remain operational on or after December 1. ”

          LINK
          http://timesofindia.indiatimes.com/business/india-business/Now-get-more-on-small-savings/articleshow/10913006.cms

          • Deepak R Khemani

            You MIS A/c which matures on 16-12-2011 WILL get 10% Bonus definitely.
            All A/cs opened up to 13-02-2006 will get 10% Bonus. I have also read the Times report today and I’m sure what has been mentioned is incorrect.
            Even then we will have to wait for an official communication from the Govt.
            All A/c which are supposed to get 5% or 10% Bonus as the case maybe were assured of it at the time of Investment. The Govt simply cannot retrospectively effect these changes wherein they will withdraw the Bonus which was assured as per the terms and conditions of the Scheme!

  12. KRANTIVIRSINGH RAJPUT

    @ JOY
    You will be entitled for 5% Bonus and the rate of interest stamped on your MIS Passbook. These new rates will be applicable for new investors. please check your MIS Passbook.

  13. KRANTIVIRSINGH RAJPUT

    Investing every financial year in PPF now will really fetch an excellent corpus for retirement. best way is to invest on Day 1 of each F.Y. Lets start on 1-APR-2012 with 1,00,000…AND continue with discipline every FY. Results will be amazing!!

  14. Avijit

    Hi Manish,

    Will the 1 lac limit applicable from this fiscal itself?
    Also, from when are the the new rates and ceiling expected to be effective?

  15. From Economic Times
    Experts say the hike in interest rate has made the PPF the best option for conservative investors. If a couple starts contributing Rs 1 lakh every year, they can together build a tax-free corpus of Rs 61.8 lakh over 15 years. However, this assumes the rate will remain steady at 8.6%, a very unlikely scenario considering the rate is linked to the yield of government bonds.
    The raising of the annual limit from Rs 70,000 to Rs 1 lakh will benefit investors looking to park money in tax-free avenues. The Rs 2,580 interest earned on the additional investment of Rs 30,000 will escape the tax net every year. What’s more, if the investor claims tax benefits under Section 80C, his effective return will be close to 16.53%.

  16. Subrahmanyam

    Manish- Thanks for the info..
    I have a query for you related to PPF account. Is there a compulsion to deposit a minimum amount in a year to keep the account active?

    • vignesh

      Hi
      Subrahmanyam

      yes you need to pur atleast 500 every year..

      if you dont they will put some extra charges while investing next time

  17. Sylvestor

    Hi Manish,

    Could you (or anybody) please explain with calculation, what would be beneficial – investing 1L every year in “10 yr. FD” or in PPF?

    Thanks,
    Sylvestor

    • vignesh

      Hi Sylvestor
      interest you get from the fixed deposits are taxable based on the income slab. But the interest acquired on ppf is tax free.(As of now).

      U can divide ur tax saving in elss or ppf based on ur risk.

      Happy investing!!

    • Sylvestor

      Both are different things , just dont compare from return point of view, also see liquidity, FD can be broken , but PPF can not in intital years .. so thats why FD might give a little less

      Manish

  18. Suresh K Narula

    Dear Manish

    Thanks, I have read article on PPF on ET and they are calculating the effective return 16.53% p.a. keeping consideration of availing tax saving under section 80C. I want to know how the rate of return 16.53% p.a. is arrived.

  19. Ankur

    Hi Manish,

    Thanks for the info!
    Question for you: Both me and my wife have separate PPF accounts. Now we want to open a PPF acc for my Son (6 month old) with either of us as guardian. Is this possible? Are their any tax implications?

    Thanks!!
    Ankur

    • Ankur

      You can open your son account and you or your wife can become the guardian , but the limit of 1 lac (the revised one is now 1lac) is applicable to both the account ,son + guardian

      Manish

      • Ankur

        Thanks so much Manish!! One clarity needed: Did you mean that in total we would be able to invest 2 lacs and not 3 lacs?

        Thanks
        Ankur

        • finguru

          The whole family (i am assuming a hindu undivided family) can invest a max of 1lakh per year. If you are found to have two accounts with contribution of more than a lakh in a year, your interest may be denied.

          currently, the POs are not linked that well – so you may be ok for some time.

    • Hello

      Investing in PPF is different from claiming deduction under 80C. So you can open an account for yourself, your wife and your son and invest 1 lakh each. But you can claim deduction under 80C for only 1 lakh amount(total).
      Please correct me if I am wrong!

      • Ankur

        From one of the replies from Manish, I learned that we can invest 2 lacs in this case as the income of minor is nothing but the income of parents….am i right??

        • I am not a financial person…so please verify before investing and let me know too:-)
          Income of minor is bundled with parent. Correct. But when you invest in any investment you have a choice of when to declare the income-every year or at the end of investment. If we invest in PPF for a child and redeem it when child becomes adult(18 years). That income will be income of child and as interest in PPF is also tax free so you will basically have a tax free income.
          Please note: You have to be careful when u claim the 80C deduction.

    • Deepak R Khemani

      Existing KVP holders continue to get all benefits promised to them at the time of investment like assured maturity value and early exit anytime after 2.5 years with the predetermined value which is printed on the certificate.

  20. Prakash

    Hey Manish , i , my wife & our 4 years old kid ( on mothers account as minor ) all have PPF account .This limit of 1L is for all three accounts combined or can it go higher ?

  21. As per ET Wealth of 21/Nov/2011
    PPF investors will earn 8.6% on their corpus this year, while NSCs will fetch an interest of 8.4%.
    But interest rates on small saving schemes will now be linked to govt. bond yields. So So investments in small saving schemes will be no different from a home loan, with the interest rate changing every year
    Market-linked return is a double-edged sword and the rate could also fall to below 8%. In the past 12 years, the 10-year yield has fluctuated between over 10% and below 6%
    The government has been spurred into hiking the rates due to an alarming fall in collections by the small savings schemes.
    Ref: ET Wealth of 21-Nov on Small Saving schemes

  22. Avijit

    Hi, I saw that State bank of India (SBI website) still say’s 8% as he interest rate and 70000 as the ceiling. Is the PPF change only for post office PPFs?

  23. sangeet bhardwaj

    Dear Manish
    Tell me that from when new rules regarding ppf will go.? Also tell me that i want to open a ppf acc. for my minor daughter. I can park 1 lac. in it although i can avail tax benefit only upto 1 lac. AM I RIGHT?

  24. Jagbir

    I went to SBI today for opening PPF a/c with the new ROI and raised limit of Rs.1 lac but the person concerned said that the new ROI and raised limit is not yet applicable. Can any one tell me whether it is true or not…..
    thanks

    • Jagbir

      Yes , the notification date has yet not come . It will be communicated in few weeks and then the new rates will be applicable , but for now you can go ahead and start your PPF account . Dont wait on that

      Manish

      • Jagbir

        Ya I opened my PPF a/c today with initial deposit of Rs.70000/-. The notification regarding increased ROI and Deposit limit of Rs.1 lac is also issued today by the Govt. and is applicable from Ist Dec.2011 onwards…..

        Thanks Manish for ur valuable advise.

  25. chaitanya

    Hi Manish,

    I’ve an PPF account & have invested 30k in MAY, 2011 itself. Will one get the new 8.6% interest on the amount already invested as well in this FYI or its only for ones deposited post 1st Dec, 2011 or will they be applicable for investments from April 2012?

    Thanks,
    Chaitanya

    • Deepak R Khemani

      The 8.6% will be applicable only to deposits made on or after 1-12-2011 and the outstanding balance from that day onwards. To make it simple your PPF A/c balance up to 30-11-2011 will get interest at 8% and from 1-12-2011 the interest will be 8.6% till 31-3-2012.

  26. SAURAV

    Hi every1,
    if we have more than 1 PPF account, then we can claim Tax benefit for only one PPF account but will continue to get interest on other PPF accounts. Is it so?

    • Deepak R Khemani

      Officially you are not allowed to have more than 1 A/c. The Account opening form clearly asks you to mention whether you have had a previous PPF A/c. What is important that your total investments in these PPF A/c’s should not exceed 1,00,000/= per financial year as the tax exemption under 80C is 1 lakh which is what you can claim.

      • SAURAV

        Thanks Mr Deepak..
        Suppose I open 1 acc for self & later 1 more in the name of my kid. Then both these accounts would be valid I guess. So in this case if I invest Rs 100000 in both, would I get interest on both accounts & claim tax benefit on only one?

        • Deepak R Khemani

          Well the rule says that you can Deposit up to 1,00,000/=(wef 1-12-11). This clearly means that if you have 1 A/c in your name and 1 A/c in your kid’s name with you as a guardian the total deposit in BOTH should not exceed 1 lakh. The tax exemption comes in later. There are a lot of people who deposit money in PPF only for the tax free interest and not because of the 80C exemption. So if you deposit say 70000 in your A/c and 30,000/= in your kid’s A/c you can claim deduction under Sec 80C of Rs. 1,00,000/=

  27. sanchit

    Hi Manish,

    I have a doubt regarding this. People who opened new PPF account on 31st Nov , will they get increased interest rate 8.6 % ?

  28. Harpreet

    Manish

    1) Me and wife (when we were not married), opened PPF account separately. As we are now married, can we still keep contributing to our individual PPF’s?
    3) When we opened PPF, we were in India and since 2 yrs are now in US. Being a NRI, can we still keep continue investing in PPF?

  29. seenu

    i think now we can only open one account ppf for entire HUF. opening a minor a/c has been scrapped(as told by SBI)? can u tell the new rules and implications

      • Deepak R Khemani

        HUF’s are not allowed to open new PPF A/c’s. Also HUF PPF A/cs cannot be renewed. There is a govt notification that no new PPF and minor A/cs can be opened. A lot of branches are not aware of this notification. I have seen it but am unable to provide you any link.
        Alos if you have existing A/c’s in HUF and Minor and Personal name the total contribution into all these A/c’s in a financial year cannot exceed 1,00,000/=

  30. seenu

    Thank you
    I do not have any link. But when I went to the SBI …after realising its importance thro ur site, i wanted to open one in my minor child name and another for my wife, they said no quoting new regulations from last month .Any advice

    • Deepak R Khemani

      I’m not sure I understand what you are saying but If you want to open a PPF A/c for yourself you can. No PPF a/c can be opened in the name of minor or HUF.

  31. Shan

    Hi Manish,

    When we deposit amount in PPF in SBI, slip has 3 parts, one for bank and 2 for customer copy. Why 2 for customer? Last time bank deposit counter returns only 1 part of slip. We have to submit original slip to our employer fro TDS purpose or photo copy of it?

    Thanks,
    Shan

  32. Amjad

    Hello Sir,

    Request your help on Financial Planning for me. Currently, am earning 7.7K p.a. I own a home and I dont have any loans to be paid. My monthly expenses comes to 32000/- and I can save up to 28000/- pm. I would like to build 60lacs in next 10 years (at 2022). Please advise. Thank you very much.

    Amjad

  33. mahesh deodhar

    I hv opened ppf a/c for my son. For 1st year, i hv posted rs. 1000. If I discontinue to deposit amount now-onwards, what will be implications?

  34. DEEPAK KUNDRA

    RECENTLY LIMIT OF PPF INCREASED FROM 70000 PA TO 100000 PA KINDLY CONFIRM WHEATER THIS INCREASE WILL GIVE THE BENIFIT FOR THE PURPOSE OF INTEREST AS WELL AS INCOME TAX.
    THANKS

    • Krantivir

      Its mentioned in the article , did you read it .. You can get it only if you are in 3rd – 6th year .. else not and it would be 25% of the balance before 2 yrs .. the interest rate payable is 10.6%

      Manish

  35. Mahesh

    Hye Manish

    Has Govt confirmed the hike of interest rate and implemented it? last time I went to the bank, I still see 8% rate.

    Mahesh

  36. Deepika

    Hi Manish,

    I want to open a PPf account with a nominal amount of Rs.25oo per month and Can i top up this amount every year by 1o% or 20% till the maturity period?, if so how do i do it?

    Thank you

    • Deepak R Khemani

      A PPF Account can be opened with a minimum subscription of Rs 500 and a maximum amount of Rs 1,00,000/= in a financial year can be deposited subject to a maximum of 12 deposits in a year. The topping up cannot happen automatically you will have to decide how much you want to deposit every month. NO ECS facility is available for this. It will not happen automatically.

      • Deepika

        Thnq Deepak,
        I think as u said i will choose not to go by ecs way inorder to top up my PPf contribution every year,instead transact every month thats painful..boring…
        but i have a purpose to topup so iam ready..

        see u

  37. guru

    Hi Manish,

    This is the first time I visisted your website & blogs are really interesting.
    I have a question wrt to ppf, I am planning to open ppf account in sbi.
    Currently I can afford to pay little more that 1 lak/year, as limit is 1 lak/year,
    can I have my wife also to open an ppf account in her name? question arises bcos my wife is a home maker so she is not salaried, will be a problem if she opens an account & i make contributions?

    Regards
    Guru

    • Deepak R Khemani

      You can go ahead and open a PPF A/c in your wife’s name and deposit Upto Rs 1 Lakh in her A/c without any problem from your income only you will get no tax benefit out of it. If she has any income be it interest or dividend she can deposit from her income.

  38. Guru

    1) As of now there is no tax on interest earned on PPF. But if there is any chance of putting tax on interest by govt. in future, then it will be a huge amount in the form of tax, right? What do you say?
    2) After 15 years, for matured total PPF amount+interest, is it possible to take the money as and when it is needed as in the case of savings account OR whether I have to close it after 15 years if I do not want to continue?
    3) On maturing, if I want total amount in one transaction, then bank/PO will not give cash, it will be DD/cheque. If I put it in my savings account, once again it will be taxable, right?

    • Deepak R Khemani

      What will happen in the future nobody knows, The rules today say that PPF is fully tax free, at maturity after 15 completed financial years you can withdraw the whole lumpsum whatever amount it may be ie 15 lakhs-20 lakhs-25 lakhs no limit. But at closure the full amount has to be withdrawn. PPF A/c can be extended for a block of 5 years from date of maturity. The bank will issue you a bankers cheque which can be deposited in your S/B A/c, If you are banking with SBI and your PPF A/c is also with SBI then the maturity amount can be directly credited to your S/B A/c.

  39. Mahendra

    Hi Manish,
    1)I want to open account for PPF in other city & not in my town (SBI in our town is always heavily crowded & nobody entertains there & all of them all very rude.)
    2)I have following documents with me right now –
    a)Pan Card. b)Voter id card. C)driving license
    3)Can I open account ?

  40. Guru

    I agree with you Deepak. But when PPF matures, then that lumpsum amount Rs.20-25 lakhs will be taxed I think (I am not sure). Are you sure that withdrawn lumpsum amount after maturity will not be taxed? Once PPF a/c is closed, amount is credited to SB a/c then there will not be any link to PPF. Then that huge amount won’t be taxed? That is what my question.

  41. No PPF is not taxed on withdrawal. Let’s get into some details:

    When one invests in any financial instrument then there are 3 stages:
    Investment Stage: when one invests
    Earnings Stage: when one gets benefit(earns interest) on investment.
    Withdrawal Stage: when one withdraws the whole or part of your investment with benefit i.e. interest or accrued interest

    Income tax department has come up with acronyms or three letter words for tax at the three stages such as EEE or EET
    The letter E stands for Exempt from Tax and T for Taxable. So EEE would stand for Exempt from Tax in investment stage, Exempt from Tax in Accumulation stage and Exempt from Tax in withdrawal stage.

    Public Provident Fund (PPF) falls under EEE stage.

    • rakesh

      Hi, Thanks for the information.
      I want to invest some money in order to get better returns and also to get tax exemption. I am new to investment field and want to know which scheme will suit me the best. I know only about these saving methods:
      Fix deposit in SBI(9.25% interest rate for 1yr+),
      PPF(8.6% interest rate with EEE benifit),

      Please help me get a right investment method for me. Please include other investment method thats I don’t know are are better ones.
      Regards

      • Let me congratulate you Rakesh. You know what you do not know – investment, tax etc and secondly you have joined one of the best personal finance websites in India -jagoinvestor.com

        If you want to play a game you need to know the players, the rules. Everyone(well almost) knows that in Cricket there are 11 players in each team and it is a game of bat and ball. But the playing style of each player is different- Sachin, Sehwag, Rahul etc.
        Similar thing is with investment each person differs in their risk capability, their investment style, their attitude. There is no one solution that fits all

        We don’t all people to drive without a driving test and license but we all allow people to enter complex financial world without any financial education

        Investment in any financial product depends on number of factors such as liquidity(after how much time you would get it), risk (will you loose your amount) , purpose and tax adds to confusion.

        Fixed deposit in SBI: 9.25% for 1 year plus. The interest you get would be taxable . And these high interest rates might not be always so why not go in for longer period 2 or 3 years.
        PPF you are committing for 15 years atleast Rs 500 a year.
        Why not Mutual Funds? FMP? Stocks?

        I hope you get the picture. There is no straight answer and there is no easy way. It’s you hard earned money so you would need to find the answers. Try reading some great posts on jagoinvestor such as 7 basics of Personal Finance you should know , Must read

        Rakesh we all are in same boat, learning, making mistakes, learning..it might seem difficult as difficult as earning money but it is required if you want to be in control. Sorry there is no easy way!

      • Rakesh

        You have long wway to go for learnings things .. explore more articles on this blog and learn more first ..

        As of now, I can tell you that you have lot of options like Mutual Funds and other similar options .

        Manish

  42. Jipal

    Hi Manish,

    I have a PPF account which is more than 15 years old, I have extended the same for another 5 years.
    Do I get the same interest rate (8.6%) after 15 years ?

  43. RAKESH SINGH

    hi Manish,
    while searching for NSC interest rate I came across the statement below on a site,Sorry to cause you trouble :( but it is going above my head. If you get time please read it & summerise it .It will help most of us.

    Waiting for your answer.

    Nov 28, 2011
    NSC INTEREST RATES INCREASED FROM 1-12-2011 : NATIONAL SAVINGS CERTIFICATES (VIII ISSUE) (SECOND AMENDMENT RULES, 2011 – AMENDMENT IN RULES 15 AND 16 NOTIFICATION [F.NO.1/7/2011-NS-II], DATED 25-11-2011

    NATIONAL SAVINGS CERTIFICATES (VIII ISSUE) (SECOND AMENDMENT RULES, 2011 – AMENDMENT IN RULES 15 AND 16
    NOTIFICATION [F.NO.1/7/2011-NS-II], DATED 25-11-2011
    In exercise of the powers conferred by section 12 of the Government Savings Certificates Act, 1959 (46 of 1959), the Central Government hereby makes the following rules further to amend the National Savings Certificates (VIII Issue) Rules, 1989, namely:-
    1. (1) These rules; may be called the National Savings Certificates (VIII Issue) Second Amendment Rules, 2011.
    (2) They shall come into force on the 1st day of December 2011.
    2. In the National Savings Certificates (VIII Issue) Rules, 1989 (hereinafter referred to as the said rules), in rule 15,—
    (a) in sub-rule (6), for the figures, letters and words “1st day of March, 2003″, the figures, letters and words “1st day of March, 2003 but before the 1st day of December, 2011,” shall be substituted;
    (b) after sub-rule (6) and the Table relating thereto, the following shall be inserted, namely:-
    “(6A) Where a certificate has been purchased on or after the 1st day of December, 2011 the maturity period of a certificate of any denomination, shall be five years, commencing from the date of issue of the; certificate. The amount inclusive of interest, payable on encashment of the certificate at any time after the expiry of its maturity period shall be Rs 150.90 for denomination of Rs. 100 and at proportionate rate for any other denomination. The interest as specified in the Table below shall accrue to the holder or holders of the certificate at the end of each year and the interest so accrued at the end of each year up to the end of the fourth year shall be deemed to have been reinvested on behalf of the holder and aggregated with the amount of face value of the certificate.
    TABLE
    The year for which interest accrues Amount of interest (rupees) accruing on
    certificate of Rs. 100 denomination
    First year 8.58
    Second year 9.31
    Third year 10.11
    Fourth year 10.98
    Fifth year 11.92

    Note: The amount of interest accruing on a certificate of any other denomination shall be proportionate to the amount specified in the Table above”.
    3. In rule 16 of the said rules, in sub-rule (4),-
    (a) in clause (iv), for the figures, words and letters “1st day of March, 2003″, the figures, words and letters “1st day of March, 2003 but before the 1st day of December, 2011″ shall be substituted;
    (b) after clause (iv) and the Table relating thereto, the following shall be inserted, namely:-
    “(v) If a certificate is encashed under sub-rule (1) after the expiry of three years from the date of certificate purchased on or after the 1st day of December, 2011, the amount payable, inclusive of interest accrued under rule 15 and after adjustment of discount, shall be as specified in the Table below for a certificate of Rs. 100 denomination and at a proportionate rate for a certificate of any other denomination.
    TABLE
    Period from the date of the certificate to the date of its encashment Amount payable inclusive of interest (Rupees)
    (1) (2)
    Three years or more, but less than three years and six months 123.14
    Three years and six months or more, but less than four years 127.49
    Four years or more, but less than four years and six months 131.99
    Four years and six months or more, but less than five years 136.65

  44. Ravi

    Hi manish,

    Whether the interest earned on PPF is taxable ?if so how much percentage of interest they will deduct?

  45. RC PANDE

    As the PPF deposit amount has been increased from 7o,000/ to 1 Lac per year . Will this one Lac be the qualifying amount for deduction u.s-80-C of Income Tax ?

  46. prem prakash

    my wife is a govt teacher with only basic salary of 6000 p.m. i am now nri. can i open an ppf account for my wife and my son separately.

  47. Vipin

    Hi Manish,

    I hav a PPF a/c with SBI, i just want to know that would SBI aldo give same 8.8% intt or that would be same as 8.6%?

    Thanks

  48. Jipal

    I want to invest 50,000 in PPF. Should I invest whole amount in one shot before 5th April or invest around 4000 every month before 5th ?
    If there is any difference in interest earn thru above investment, what will be that ?

    Thanks in advance!!

  49. Prachi Arora

    Can I deposit entire 1 Lacs on first day of the financial year itself despite not having received that much salary by this date, although the salary for the entire year is going to far well exceed this limit as I am in 20% tax bracket ?

  50. KRANTIVIR RAJPUT

    PPF Interest Rate is now 8.8% w.e.f 1-APR-2012.
    NSC-5YR-8.6%
    NSC-10YR-8.9%
    MIS-5YR-8.5%
    [SOURCE: ECONOMICS TIMES Dated 27-MARCH-2012,page no 15]

  51. Chetan Parikh

    I have ppf a.c with p.o. ( Individual)which matured after 20 yr with a balance of 15 lakh, in june 2010.
    They have refused to extend the a.c for further 5 yr.
    My agent advised me to open new a.c in bank.He advised me to keep the maturity amt in same old p.o a/c., with the assurance that interest will continue to be credited every 1st April. They have credited the interest in 1-4-11 & 1-4-12 also on matured a.c

    Interest on 15 lakh matured amt is tax-free so i do not want to withdraw the money.

    I have 2 doubts, whether int on old ppf a.c will continue to credited, or they will forfeit the int. at later date?What is the exact rule?
    Simultaneously can I open new a.c for new subscription?

    • Anand

      They should not refuse to extend it. It is by law that extension is applicable.

      There are a couple of formalities for declaring your intentions regarding post maturity continuance. Form-H is to be used to declare the intention of continuing the account with subscription for each extended period. It should be filed before the first contribution is made for the first year of extension. In its absence, the account will be treated as without-subscription extension. Fresh contributions made to such accounts will enjoy neither the deduction u/s 80C nor the interest (MoF (DEA) 7/21/88-NS-II dt 10.8.90).

    • Chetan

      If one account is active , you cant open another one, you will have to close the first one first ..

      Why are they not ready to extend it for next 5 yrs, whats the reason ?

      • Chetan Parikh

        They Just refused that 3rd extension is not permitted.. My PPF agent did not pursue it.
        Now I know from you & reading other information that one can extend it umpteen times.If form “H’ is not given it will be considered as matured account. But according to rules, it can enjoy interest on maturity balance at same rate till withdrawal, no time limit.

        • Deepak R Khemani

          What is not being discussed here is this, A PPF account can be transferred from any Bank to any Post office and vice versa, So if your Post office account is not being renewed by the Post Office, get it transferred to a bank near you which has PPF account facility and then get it extended from there itself, Remember you CANNOT have 2 PPF accounts in your name, your PPF agent is not pursuing it because PPF agents commission has been done away with, you will have to get it done on your own.

  52. prem prakash

    dear Mr. chauhan,
    thanx for reply against comment sl no. 174.

    i m only an NRI not my wife and son. my wife is working in india as a govt primary school teacher with basic salary only 6000 p.m. i send my remittance thru NRI account which she is able to draw thru atm card. my question—-my this amount can’t she deposit as PPF on her name after opening a PPF account. if so ….up to how much amount could be done. pls make sure there should not come any impact on her govt service income is very less.pls advise.

  53. Avijit

    Hi,
    I have my PPF AC in which I save upto max limit (Rs 1 lac this year ) and also claim tax benefits. My question is, can I open a PPF in my minor kid’s name and manage it as father and natural guardian? Not for tax benefits, just for saving money for her.

      • Arin

        Dear Manish,
        After several days’ search on this topic (total investment limit for PPF of minor and self) on several sites, I have got this clear reply. Would you please clarify further whether both the accounts will earn interest as per the PPF rules.
        I am asking this seemingly repetitive question, because experts (?) on several sites say this is not possible. They claim that the combined investment limit on PPF of minor and self is limited to Rs. 100k, and any additional amount will not earn interest. Your answer is crucial to me as I have planned this mode of investment for my child’s education (not tax benifit).

  54. VK

    Hello Manish and team

    Thanks. Great info over here, I have a few queries
    1. I have a PPF ac in SBI on my name and a guardian in one more account in my son’s name at Post Office, can I deposit 1 lac in each account (i.e. 2 lacs). I dont need PPFs for 80c savings. Will I get interest on both after 15 years.
    2. My wife is a home maker, not salaried but have a bank a/c to which I am dipositing some money every month, can she have a PPF on her name and pay thru this a/c. Pl let me know.

  55. Amit

    I am working in Oman from last 3 years and my wife is living with me. Can i open PPF accounts for myself and for my wife to get tax fee interest benefit form both the accounts. We do not have any income source in India.

    Please Advice

  56. SATYAJIT CHOWDHURY

    Hi, Mr. Manish,

    I am very much interested to open a PPF account in SBI, I would like to know that I am willing to deposit the amount in monthly basis and can i deposit any amount in any month (more than Rs.500.00 to less that 1,00,00.00)?

  57. Ranjne

    I deposited in PPF A/c last year (29/02/12 )Rs 500 .As my knowledge now they are giving 8.8 % as interest rate now. But when I updated the Pass book yesterday 4/01/13 the interest amount is showing Rs 4 . Please clarify why Rs 4 instead of Rs 44 .
    Thanks
    Ranjne

  58. Kalyan

    Hi,

    I have one question regarding PPF, if i invest 1lakh in the frist year,is it like i have to invest the same amount every year?

    Thanks,
    Kalyan.

  59. Gaurav Juneja

    What is the current rate of interest ?

    Please also share the financial year wise rate of interest for the last five years?

    Thank You in advance for your valuable information as always

    Gaurav

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