How to calculate PPF maturity, with worked examples

Steps

1. Choose the yearly deposit, between ₹500 and ₹1,50,000, and the number of years. Here: ₹1,50,000 and 15.
2. Take the interest rate. The National Savings Institute shows 7.1% from 1 April 2020, and the Government reviews it every quarter.
3. After year 1: (0 + 1,50,000) × 1.071 = ₹1,60,650. For each later year add the deposit and multiply by 1.071.
4. After 15 years the balance is ₹40,68,209. Subtract the ₹22,50,000 you invested to get the interest, ₹18,18,209.
5. Or enter the deposit, the years and the rate in the PPF calculator, which also shows each year.

Why the timing of deposits matters

The Scheme says interest is earned on the lowest balance in the account between the close of the 5th day and the end of the month, and is credited at the end of each year. A deposit made on or before 5 April therefore earns for all twelve months of the year.

Spreading the same ₹1,50,000 over twelve monthly deposits of ₹12,500, each on or before the 5th, gives ₹39,44,599 after 15 years instead of ₹40,68,209. That is ₹1,23,610 less, only because the money went in later.

The effect of time and amount

At 7.1% with one deposit a year, ₹50,000 a year grows to ₹13,56,070 after 15 years. ₹1,50,000 a year grows to ₹40,68,209 after 15 years, ₹66,58,288 after 20 years and ₹1,03,08,015 after 25 years. The last years add the most, because interest is earned on interest.

Limits, term and the rate

An account takes at least ₹500 and at most ₹1,50,000 in a financial year. It matures after fifteen complete financial years from the end of the year in which it was opened, and can then be extended in blocks of five years with further deposits. The rate is set by the Government and may change each quarter, so treat a long projection as an illustration. The National Savings Institute states that the interest is free from income tax.