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. 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


  2. Kalyan


    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?


  3. 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 .


    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)?

  5. 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

  6. 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.

  7. Avijit

    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).

  8. 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.

  9. 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.


    PPF Interest Rate is now 8.8% w.e.f 1-APR-2012.
    [SOURCE: ECONOMICS TIMES Dated 27-MARCH-2012,page no 15]

  11. 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 ?

  12. 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!!

  13. 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%?


  14. 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.

  15. 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 ?

  16. Ravi

    Hi manish,

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

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