Ppf simple interest being given on changing rates
Satyanarayan
(Querist) 01 November 2016
This query is : Resolved
Respected Experts
I am senior citizen living in Navi Mumbai after my retirement from a pvt sector company.
I had opened a PPF account in 1991 and constantly contribute to it.
However I am very confused with the new interest regime of the government since April 2016.
I understand that the PPF interest rates will be linked to Govt bonds and hence it will be revised every quater.
But to my understanding the interest rate will only be applicable on the principle amount.
For eg :
If my PPF balance on 31-Mar-2016 was Rs 10 lacs and the government gives an simple interest rate of Qtr 1:8.1% Qtr 2: 8.1% Qtr 3: 8% Qtr 4:8% then my PPF balance without any withrawls or deposits on 31-Mar-17 will be Rs 10,80,500.
The net yield is 8.1%.
However as all banks apply compound interest on all FD's and since the government has opted to revise the PPF interest rates every quater then the rate change in a quater should be applicable on the compounded value of such an amount.
For eg:
If my PPF balance on 31-Mar-2016 was Rs 10 lacs and the government gives an compound interest rate of Qtr 1:8.1% Qtr 2: 8.1% Qtr 3: 8% Qtr 4:8% then my PPF balance without any withrawls or deposits on 31-Mar-17 will be Rs 10,82,963.
The net yield is 8.3%.
Hence considering the above example do we subscribers of such a pension or retirement fund can opt for a writ petiton so as to receive compound interest on our investment instead of Simple interest.
Or is there a law that forbids us to do.
Please guide me.
Regards
Satyanarayan Swamy
Kumar Doab
(Expert) 01 November 2016
There are many individuals and bloggers that have dwelled on such issues, in detail, in a very simple to understand language.
You will get contracted rate only at compounding is annual at the end of year.
You may go thru:
http://www.planmoneytax.com/the-right-way-of-ppf-calculation/
Satyanarayan
(Querist) 01 November 2016
Firstly I have been doing PPF calculation long before websites explained them but thanks anyway.
Secondly my question needs to be read again rather than clubbing it with other queries.
In simple words :To my knowledge never before till Apr 2016 had the PPF interest varied throughout the year on quarter-on-quarter basis.
Hence paying simple interest was logical as one could be assured of a fixed sum at the end of FY depending on what he had deposited or withdrawn in that FY.
However with the government linking it with market rates there is a certain level of uncertainty that has come in.
Can a common man like myself or your good self know if in the ensuing quarter the PPF interest rates would go up or down.
At least I am unable to say it with a certain level of certainty.
It can go up or in all probability go down.
Hence once again in simple language my query was that ::can we who are subscribers of such a pension or retirement fund opt for a writ petition so as to receive compound interest on our investment instead of Simple interest.
Or is there a law that forbids us to do.
I think I have made myself abundantly clear.
Rajendra K Goyal
(Expert) 01 November 2016
The government would fix the interest rate of small saving scheme including PPF every quarter.
The interest would be added in principal on 31st March every year.
You can visit news item:
http://www.planmoneytax.com/interest-rate-ppf-nsc-kvp-ssa/
Kumar Doab
(Expert) 01 November 2016
You can exercise your constitutional rights and approach court for anything.
Until or unless the Government that has floated the scheme in market with preset conditions amends the condition you or anyone that has signed the contracted T&C shall get ROI on contracted terms.
Hope we have made our self abundantly clear.
Pensioners are united by various forums.
Try to petition the Minister and PM.
It may work.
