Those who invest in PPF find it the most attractive thing about tax exemption. If we look at the last one decade, there has been a steady decline in the interest rates of PPF, but the pace of investment in it has remained the same. People are preferring to invest in it despite the interest being low as compared to other retirement schemes.
New Delhi. Public Provident Fund (PPF) has always been a preferred option for long term investors. The biggest reason for this is risk-free and stable returns and tax exemption. If you look at the statistics of the last decade, many changes have been made in PPF. As soon as the Modi government came to power in the year 2014, the investment limit in PPF was increased, due to which more tax exemption was available. At the same time, a big cut has been made in its interest rates in a decade.
Since the year 2013, the interest rates on PPF are continuously decreasing. In the year 2014, the government increased the investment limit in PPF from Rs 1 lakh to Rs 1.5 lakh annually. However, since then the interest rate has come down from 8.8 per cent to 7.1 per cent. That is, within just a decade, the interest rates on this scheme have come down by 1.7 percent. If you look at the official figures, the interest on PPF was 8.8 per cent in the year 2013, which has now come down to 7.1 per cent.
Interest decreasing year by year
Talking about interest on PPF, from April 1, 2013 to March 31, 2014, the total interest was 8.7 per cent and the investment limit was Rs 1 lakh. After this, from April 1, 2014 to March 31, 2016, the investment limit was increased to Rs 1.5 lakh, while the interest rate remained the same at 8.7 percent. Between April 2016 and September 2016, the PPF interest rate was revised and it came down to 8.1 per cent.
Interest kept decreasing further
After this, between October 2016 and March 2017, the interest rate of PPF decreased again and it came down to 8 percent. This process did not stop and till June 2017 its rate fell to 7.9 percent. By September, the PPF interest rate had come down to 7.8 per cent. Then between January and September 2018, it declined further by 0.20 per cent. The interest came down to 7.6 per cent.
Big cut in the Corona period
Its interest rate increased between October 2018 and June 2019 and reached 8 percent, but it declined again from July 2019 to March 2020 and the effective interest rate came down to 7.9 percent. Then came the time of the Corona period and the government reduced its interest rate to 7.1 percent in April 2020, which is still maintained. In this, the maximum limit of the investor remains 1.5 lakh only.
How effective compared to other plans
The interest rate on PPF may be low but the tax exemption available on it makes it popular. Along with this, the guarantee of fixed returns from the government also attracts investors towards it. If we look at other retirement schemes, then the interest rate on PF is 8.1 per cent, but only employed people can invest in it, whereas PPF account can be opened by anyone. The return on investment in retirement fund is good. Some funds are giving returns of up to 10% per annum, but do not get the benefit of tax exemption. Overall, despite the low interest rate of PPF, it remains a good option, while there is full scope for further increase in its rates.
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