When to invest in PPF to get higher returns?

Many of us have PPF account. But we fail to understand the simple tricks like when to invest in PPF to get higher returns. Today I am going to share with you one simple thing about PPF which you might not noticed during the opening of your PPF account.

Interest for a particular month is calculated on the lowest balance between the close of the fifth day and the end of the month. This accrued interest will be credited to the account at the end of each year. It means if you want to have a benefit you need to invest your monthly contribution within the fifth of every month. Else, your contributed amount will be eligible for gaining interest for the next month. Therefore, if you contribute after fifth of the month then for one month that amount will be idle.

I will show you with illustration that how you can maximize your returns by simply following the above condition of interest calculation.

Suppose Mr.X and Mr.Y opened PPF account on same day and started to contribute Rs.8,000 each month but Mr.X is contributing before 5th and Mr.Y is contributing after 5th of each month then how much difference we can see.

Mr.X’s Accumulation after 15 years.

First Year Contribution is Rs.8000 PM.

1st Month Contribution-8,000+688 (interest for 12 months) =8688

2nd month Contribution-8,000+631 (Interest for 11 months) =8631

Like this at the end of 1st year Principal is (8000*12) + (4472) =1,00,472. The same amount will be his contribution for the remaining 14 years. So, at the end of the 15th year, his accumulated amount is Rs.25,39,929.

Mr.Y’s Accumulation after 15 years.

First Year Contribution is Rs.8000 PM. (But after 5th of each month)

1st Month Contribution-8,000+630 (Interest for 11 Months) =8630

2nd Month Contribution-8,000+573 (Interest for 10 Months) =8,573

Like this at the end of 1st year Principal is (8000*12) + (3,784) =99,784. The same amount will be his contribution for the remaining 14 years. So, at the end of the 15th year his accumulated amount is Rs.25,22,536

The difference of returns between Mr.X and Mr.Y is-Rs.17,393.

But you may say, what is the time value of this difference after 15 years?

It may be your one month’s household expenses what you are paying now. How is it?

Suppose today you have some household expenses Rs.7,257 PM then the future value of that will be Rs.17,393. (Inflation-6% Tenure-15 yrs).

Therefore, what I mean to say is, with simply following your monthly contribution before the fifth of every month you can get higher returns. Hope this point may add value to your saving 🙂

166 Comments

  1. Sir

    I have a PPF Account in SBI Linking Road Branch for 15 years.Every year  on the 2nd April i deposit 1.50 lacs into my account.I have completed KYC and submitted FROM H at your branch personally
    Today i made online transfer of 1.50 lacs and i got a SMS saying that my account has Matrured.
    What can i do as this is my MAIN Sourcce of Retirment. I wish to keep on continuing payments every year. Since the employee has not done his job does it mean that my PPF account is closed. Cant i again fill Form H and renuew it

    Reply
    • Dear Arjun,
      When it is matured actually? on 1st April 2019 or 1st April 2020?

      Reply
  2. Can i invest 1.5L in SSY scheme and 1.5L in PPF scheme for my daughter ?

    Reply
    • Sir am going to invest 1.5 L in end of March so will I get interest for whole year or only one month if so can I invest in April

      Reply
  3. Sir,
    Kindly clarify:

    I opened PPF account on 30.03.2019 & deposited 1.5 Lac on the same day. And again I deposited 1.5 Lac on 03.05.2019. Will I get interest for entire 3 lacs . Is the 1.5 Lac limit for financial year or Annual difference should be 1 year??

    Reply
    • Dear Ravi,
      Your first deposit falls under FY 2018-19. Second deposit falls under FY 2019-20. Hence, you will be eligible for the interest on all the Rs.3 lakh.

      Reply
  4. This article is superb.

    Reply
  5. Thank, Sir. It is a very good article. However, I want to say something about the maximum gaining option from PPF. If I invest total amount i.e. Rs. 150000 at a time (if possible) before 5th April of a financial year, then I think the return will be the maximum. What is your opinion?

    Reply
  6. I Have doubt, whether i can invest various amount in each month in FY. i.e one month Rs.5000, next month Rs.3000. in a same FY.

    For 1st year, My total investment will be 80000, Can i invest 100000 from 2nd year.

    Reply
  7. Hi
    I hav opened ppf account in Feb 2019 with a deposit of 5000…..now I want to deposit 1lac…..shd I deposit it in Feb or April?
    Please advice

    Reply
    • Dear Mec,
      You can either invest in this FY (before 31st March) or in next FY also (After April).

      Reply
  8. Just one clarification. After 15 years if i extend my account, will i still get the 80c benefit. Also will my interest during the extended period be tax free.

    Sulagna

    Reply
  9. Hello Basu,
    Is it advisable to pay the PPF amount in lumpsum in one shot? Can you please confirm the calculations if Mr. X paid Rs 60,000 before the 5th of January in 2019?

    Regards,

    Reply
    • Dear Amit,
      It is beneficial if you pay it in one lump sum before 5th of April every year.

      Reply
  10. Hi,

    I have monthly installments for my ppf account(so, it comes to 12 installments for a year). If I would like to invest more, then should I invest lumpsum or increase monthly installment? We are only allowed to make 12 installments in an year.

    Consfused. Please clarify.

    Thanks

    Reply
    • Dear Shrilok,
      You can invest as per your wish but make sure that you must not cross the maximum limit.

      Reply
  11. Nice explanations Sir…

    Reply
  12. Sir

    I am investing 4000 a month and want to invest 4000/month or 50000 a year more
    What should I opt
    Ppf or any other insurance
    My age is 25

    Reply
    • Dear Amit,
      Without knowing your financial life, it is hard for me to suggest where you can invest.

      Reply
      • So you can advise me sir

        Reply
        • Dear Amit,
          Without knowing your full financial life, I can’t suggest anything BLINDLY.

          Reply
  13. Hi, does it make sense to invest maximum money possible in initial few years (let’s say 4-5 years) of PPF? I ask this because of the long compounding that will happen on money invested in initial few years. For example, money deposited in first year will be compounded over 14 years!! At 8.7% earnings, my calculations say the effect of this compounding on money deposited in 1st year would be an annualized 16-17% at maturity!! Is this true? And similarly, the money deposited in 2nd year, 3rd year and so on will have dwindling annualized returns but still healthy around 14-15% annualized rates. Wish to know your comments on this

    Reply
    • Dear Gursharan,
      Whether it is PPF or any other instrument, to enjoy the compounding you have to invest more and you have to wait for long term. In compounding formula, only two things are under your control i.e. N and P. Hence, maximize these two at your end.

      Reply
  14. Hello Sir ,
    I want to open my ppf account and invest yearly basics since its already 18th September 2018 , could you please suggest me should I open account and start investing from between 1-5th October 2018 or should I wait till April 2019 and invest lum-sum amount then?

    Reply
    • You should start an account and investment as early as possible. In this way you will get more benefit from compounding of interest.

      Reply
  15. Hi do u have any idea about provident fund ..
    I mean i work at acompany for around 2.8 years now i join a new company i transfer my old pf to new pf accounts,the pf amout got transfer but my pension amout not transfer can i know why??

    Reply
    • Harshad-EPS will never get transferred. EPFO just update your service records. Hence, you no need to worry.

      Reply
      • So at the time of my retirement will i get the pension amout of last company also

        But where can i get to see the amout of total pension

        Reply
          • Is there site where i can see my pension amount just like my pf amount??

            Reply
            • Harshad-No other site than checking your own EPF Passbook online.

              Reply
  16. Hi Basu,
    Thanks for the wonderfully explained article.
    I have a question:
    I currently have a PPF A/C and try my best to deposit the maximum threshold every year.
    I want to maximize my investment by opening a PPF AC for my father (senior citizen with pension).
    This is just to maximize/ double the investment and not to aid to my 80C contribution.
    I know opening an AC for my father will not be any problem as he is a major. But my question is, I will be the sole contributor in the new AC. Can I do that to maximize my investment?

    Thanks,
    Arghya

    Reply
  17. Sir,I m a privet school teacher ..n I wan to open a PPF acount …but it’s 28 of July …so can I open it in august befor5th( monthly) or I should wait for 1st April ( lump-sum) as I HV an insurance policy whose premium I HV to pay on 5th august so it is quite difficult for me to pay to premium with on a gap of 2-3 days…

    Reply
    • Priyanka-OPEN NOW. Such difference is not high and waiting for this will again harm you of what you already did a mistake like not investing earlier.

      Reply
  18. Dear Sir,
    Kindly clarify my doubts regarding PPF account opening.
    Since I have missed the start of this financial year 2017-2018 by 4 months already. Should I wait till April 2018 for opening PPF account or should I do it in September 2017 ?. I am planning to invest 1.5 lacs annually every year. Kindy guide what would be the best option/way to do it in terms of obtaining maximum interest benefits for lumsum annual investment in PPF account. Whether to wait till April 2018 or open it in September 2017 ?
    Am totally confused.

    Thanks and Regards.

    Reply
  19. Hi Basavaraj,

    Since April 5 has already passed, should I invest 1.5 lac in one shot before the 5th of any upcoming month or should i put in the money every month before the 5th.

    Thanks in advance.

    Reply
    • Mamta-You can do lump sum before 5th of May also (if you can afford). Otherwise, stick to monthly investment.

      Reply
  20. Dear sir

    Presently my age is 25,i am planning to open the PPF Account on feb 04 2017 can you plz tell me what will be my maturity date

    Reply
      • Which one is better to earn more from PPF Account Monthly contribution or Annual contribution.

        Reply
        • Harshad-Annual contribution before 5th of April every year will fetch you more than monthly contribution.

          Reply
  21. My PPF account will mature in the month of Feb 2016. Now my question is
    1. How much %age of amount i can withdraw after completion of 15 years and i don’t want to close my PPF account i.e. i want to extend till 05 more years.Is there any provision ?
    2.SBI bank manager told me he is not aware about the rule of withdraw limit after the completion of 15 years with extension of 05 years.
    3.Kindly suggest me best solution

    Reply
  22. how many times I can renew my PPF account?
    After 15 years, will I be able to withdraw my matured amount in any proportion at any time ?
    I am thinking of buying home after 15 years, is it advisable to accumulate amount in ppf account ?

    Reply
    • Jay-You can extend as long as you can. Withdrawal rules are explained above. Please go through it. PPF suffice to reach the goal or not depends on what is your goal amount, how much you contribute and what will be the inflation of that goal after 15 years. Hence, I can say anything on that.

      Reply
  23. Dear Mr.Basu,

    I have opened a PPF account on my daughter’s name (Minor). But the time account matures, she will be a major. While closing the account, can the parent withdraw the amount or only my daughter can. Please clarify.

    Regards,
    Sai

    Reply
    • Sai-Only daughter can withdraw it as at that time she will be major.

      Reply
      • She is US born. I was just worried if she could withdraw the amount without any hassle post maturity.

        Or would you suggest me changing the account holder name ? Please suggest, Mr.Basu.

        Reply
        • Sai-If she is US born, then she might be foreign residents when opening account right? Sadly you can’t change the account names.

          Reply
          • Mr.Basu – By the time I had opened the account on her name, we have moved back to India. We have her PIO (Person of Indian origin) card too.

            So does this help ?

            (PS: She is simply US born. So she is US citizen by birth. We will reside in India forever. So i assume this shouldn’t be a problem.)

            By the way, while closing the account & drawing the money, what is the list of documents she might have to furnish ? Please clarify

            Regards,
            Sai

            Reply
            • Sai-Then no issues. But while she attains the age of 18, then you have to inform to Bank or Post where you opened the account that she attained majority by providing her age proof and other KYC documents. Then it will turn her account.
              India is evolving fastly into online mode. Hence, as of now physical presence is required. But don’t know the future after 15 years.

              Reply
              • Thank you so much. Such a valuable conversation.

                Will surely knock your door in case of any queries.

                Regards,
                Sai

                Reply
  24. SIR, I WANT TO KNOW ABOUT MORE THAN SALARY OF RS. 15000/- PER MONTH, AND WANT TO CONTRIBUTE THE EPF ON MY PRESENT SALARY I.E. RS.70000/- PER MONTH, THE CONTRIBUTION OF COMING RS.8400/- PER MONTH. I.E. (EPF 8400+EPS 1250/- TOTAL COMES TO RS.15550/- ON ACCOUNT OF EPF. ON BOTH CONTRIBUTION (EMPLOYEE AND EMPLOYER).

    KINDLY INTIMATE ME IS IT POSSIBLE OR NOT. AND WHAT TYPES OF PROBLEMS MAY BE FACED IN FUTURE.
    THANKS SIR.

    Reply
    • Inder-It is possible if your employer also ready to contribute on your salary (Basic+DA).

      Reply
  25. Sir … my question — when we get more benefit(interest) if we invest on monthly wise before 5th of every month or lump sum amount for the whole year in April 1 to 5.

    Reply
      • Thank you so much for clarifying my doubt.

        Reply
  26. If I Open account in May between 1 to 5
    Will I loose some benefit I case I would have opened it in April 1-5
    How much will I be actually loosing on the interest part and Tax part
    Also do the same rule apply for Sukanya Samriddhi Account

    Reply
    • S-For tax part, there is no difference. However, if you deposited between April 1-5th than May 1-5, then you lost one month interest on your money.

      Reply
      • Does this loss apply to lump sum or even monthly paying if I start from May 16
        Thanks in advance to bear with my amateur questions

        Reply
  27. sir is PPF really a good option? because till 15yrs or atleast 7yrs we cant take a single penny out of it right? money which cant be used at the time of emergency also is of wat use later? so i doubt if its good. pls let me know wat advantage it has

    Reply
    • Guru-If it matches your financial goal, then it is BEST. Otherwise WORST.

      Reply
  28. Sir i opened an PPf account with 70000 by 2012 for tax exemption but dint know i have to pay every year. in 2014 i knew it and started paying 500 every year. so will there be any problem at the time of maturity? i think my account is still active as i get interest every year. may be that interest is considered as a deposit? if so then i dont want to put 500 every year right? and also after 15 yrs ill get the 70000 with the interest but what about the 500 that i pay every year? can i take out that also or i have to wait for 15yrs from date of deposit of the 500? hope my query is clear:) and cant we withdraw the interest alone from PPF (like in FD)??

    Reply
    • Guru-There is no problem at maturity due to high and low payment in PPF. You are again wrong, crediting interest not means your account is active. It will be active only when you deposit the minimum amount. Regarding withdrawal of Rs.70,000, refer my earlier post “PPF-Loan and Withdrawal“.

      Reply
      • sir i did not find answers for my question in the above link. so pls clarify me again..
        u mean to say that there is no problem at maturity? the left out two years are ok? later i have to pa penalty for it? if so how much? and as i asked when can we withdraw that 500 per year payment? it also needs 15yrs?

        Reply
        • Guru-If you thought to invest, then you have to pay the penalty and activate it. Otherwise, no need to activate and there will not be any effect at maturity or return part. Regarding withdrawal eligibility, refer above post.

          Reply
  29. While opening PPF account ,if i start Lump sum investment starting April 16 (max i.e 1.5 Lac )
    For consecutive years to come ,do i need to continue this or i have option for less amount and monthly instead of Lump sump etc
    Kindly advice

    Reply
    • Sachin-In consecutive years, you are flexible to deposit as per your wish.

      Reply
  30. For me, Best time in year to pay PPF in single shot is the first week of April, where on 5th April the interest calculated on total amount and fiscal starts at first, so double benefit as I started the PF on april…. it is 14 year than 15 actaully

    Reply
    • Nobody-I said the same thing and nice to hear of you about following it.

      Reply
  31. Sir,

    1) I am yet to open a PPF account. Is it advisable to open it now, in the month of March’16, or is it better to open in April ’16.
    2) I have already met my 80C commitments for the current 15-16 FY. So will opening the account in March’16 have any advantage?

    Thanks in advance for your help.

    Reply
    • Badri-1) NOW.
      2) You have to invest for your financial goals but not ONLY for tax saving.

      Reply
  32. Sir I want to open a ppf account in united bank.
    1.Is it valuable to open in January or should I wait it for April 1st, 2016 for higher returns?
    2. say I have deposited 1000 in the month of Januaryand the lumpsum amount in April, 2016, will I be at a loss?

    Please guide how to make the investment

    Reply
    • Madhur-1) Start now. Why you want to waste for 3 more months?
      2) No..How?

      Reply
  33. Suppose I want to invest 24000 per year in ppf.
    How will I earn more interest-
    whether by investing the whole money at a time?
    Or by investing 2000 per month for 12 months?
    Or both the interest accrued will be same?

    Reply
    • Nihar-You earn more by investing lump sum between April 1st to 5th than any other options.

      Reply
  34. Hi Mr. Basu,

    Great Post.. very informative!

    Just want to know one thing – I generally make two deposits in PPF – 1Lakh in Dec month (10th Dec) and 50,000/- in Mar (10th Mar)

    Que 1: How is the interest calculated in my case?
    Que 2: Could you please show (using the calculations) the benefit that I could have received if I had deposited the entire amount of 1,50,000/- in Apr as lum sum.

    Reply
    • Suchitra-1) December and March deposits will be considered for calculation from Jan and April respectively.
      2) If you deposited the same in the month of April, then the interest will start to accrue from April month itself (if you deposited within 5th, otherwise from May).
      I explained how the interest is calcualted. Also, cleared your doubts. Hope this much is enough.

      Reply
  35. I have a PPF Account in my name from last 6years & i am getting benefit U/S 80C of Income Tax every year.

    Now I want to know that can i open 3 new ppf accounts in the name of my Wife & 2 minor son and i will deposit amount in these 3 accounts, but not claim rebate U/S 80C.

    The interest earned in these accounts of my wife & two minor son will be treated as my income or will also be tax free.

    Reply
    • Vijay-You can open in their name. But do you feel such over investment in single product worth?

      Reply
  36. I want to open a PPF account, kindly suggest should i invest lump sum amount or monthly installment basis?

    Reply
    • Nitin-It is purely based on your convenient. If you want to invest lump sum better to invest within 1st to 5th of April every year. If monthly then within 1st or 5th of every month.

      Reply
  37. Sir I want to ask whatever money we invest to EPF can we get income Tax Rebate on that under.80c
    thanks

    Reply
    • Gaurav-Only the employee contribution is eligible for deduction under Sec.80C.

      Reply
  38. What difference will it be if the Mr. X is depositing 8000 P.M. while Mr. Y is depositing the whole amount 8000 x 12 = 96000 once at the starting of the financial year??

    Reply
    • Saugata-You can calculate the same by using the simple above method.

      Reply
  39. Informative topic !!

    Bank used to do the same earlier while calculating interest rate on saving.

    Reply
  40. Hello Basu

    Thanks for clearing my myth, I recently opened a PPF account with ICICI bank and for year 2014-15 i invested 150000, however as i was not aware of the calculation i kept the money in the savings account and deposited only in the month of march. This is am eye opener for me for the remaining years Thanks

    I have one more query, work in a private company and my epf contribution gets deducted, the company also gives the facility to invest in NPS under section 80 CD(not sure if i wrote the correct section), normally which i was told the max from this route i can invest upto 10% of my basic and get a tax benefit over and above 80c. As per the new tax law does it mean i can invest 10% of basic +50000 in nps which mean i can get more benefits fro 80 CD, please let me know if this is correct and does this make sense. I fall under the 30% slab.

    Reply
  41. sir,which wold be better birla sun life mnc fund or uti mnc fund?is this right to invest in mnc funds now?

    Reply
    • Shivam-May I know your logic in selecting sector theme like MNC?

      Reply
      • sir,there are three reason that made me to think to invest in mnc fund.FIRST-they have performed little much better than leading funds of their category like reliance tax saver,axis long term equity in tax planing ,franklin india high growth companies fund in multicap,franklin india smaller companies fund in mid snd smaller cap category in 5year time period.SECOND-they invest in high quality and well managed famous companies.THIRD-according to website of crisil both funds are consisting performer.
        i was doubtful as i heard a news recently that sebi has softened the delisting norms for mnc companies as it can effect the diversification quality of fund.but global companies are eager to come and to listing in indian market.
        as my view is of long term should i go for invest in a muticap fund and a small and midcap fund or go for a multicap and a mnc fund?

        Reply
        • Shivam-Performance in sense since how long? Is one year, two years, three years or five years? Look for long term history but not short term. High quality well managed companies are also their in India (I am not underestimating your research, but making you to diversify than concentrating on any one theme or sector). My suggestion is to have midcap fund and multicap than mnc fund.

          Reply
          • OK SIR,giving first priority to diversification quality instead of return, i would go for investment as your suggestion

            Reply
  42. Hi sir,
    How much percent of my income should I contribute towards ppf for a safe play.I’m 30 yrs old.can you pls suggest sir.

    Reply
  43. Hi,

    I have a question, i opened PPF account with 1500 rs PM i.e( 18000) PA.. Can I increase that amount to 3000 PM i.e. (36000) PA.. Or there are any restriction on increasing the amount.

    Reply
  44. I have opened the PPF account in the year of 2009. Till date I am investing on Yearly basis, that is once in a year ( in the month of December or January ) also my amount of investment is not fix. But now I want to fix the amount of investment per year . Please advice me when should I invest to get the maximum returns.( I have gone trough the above mentioned Example of Mr.X and Mr.Y) Also please let me know that should i follow the monthly investment or yearly one time investment is ok . Which investment will give me good returns Monthly OR Yearly? If yearly then in which month I should invest in my account.

    Reply
    • Nikhil-If you want to invest lump sum then invest before 1st to 5th of April. If monthly then opt for each month investment within 1st to 5th.

      Reply
  45. I have opened ppf account recently July 31, 2014 .

    q1. What is the start date of my ppf account whether July 31,2014 (or) April 1,2015?

    q2. if July 31,2014 is start date means, end date of ppf account is July 31,2029 but actual end date is March 31, 2030 some article said. if it is true means , can i invest in between July 31,2029 and March 31,2030 without using extending five year rule(Note:Actual end date March 31, 2030 but July 31,2029 itself fifteen years going to complete right).But it exceeds more than 15 years

    q3. I have opened account only August 31, 2014. How many installment can i use in the financial year 2014-2015(from July 31,2014-March 31,2014).

    q4. Can i get interest for months from July 31,2014 to March 31,2015?

    Reply
    • Harish-Your start date is 31st July 2014. Yes you can invest till 31st March 20130 as investment in PPF is fixed on financial year base rather than your account start date. Typically PPF is more than 15 years product rather than theoretical way of saying 15 years product. You can use maximum 12 installments, irrespective of when you opened. Because as I said earlier investment will be considered based on financial year. Regarding interest calculation, yes you get it but go through above post to understand how interest is calculated in PPF.

      Reply
      • Thanks a lot ,for interest calculation , If i understood correct means
        My monthly contribution rs.1500

        for first month interest calculation : 1500 * 8.7/100 = 130 .5(12 month interest) but i have started on account july 31,2014 . So from july 31,2014 to March 31,2015(current financial year) totally 8 month .
        then 1500 * 8.7/100 = 130 .5/12 * 8 = Rs.87(8 month interest) interest only first month investment.
        and remaining month interest calculated by reducing one,two,three,etc from 8 month

        ie.2nd month 130 .5/12 * 7 = 76.12(7month interest)
        3rd month 130 .5/12 * 6 = 65.25(6month interest)

        Reply
  46. I need some clarification interest calculation on PPF
    My monthly contribution is rs.1000 ie. yearly 12000 then interest rate as 8.7% for current financial year.
    interest = 12000 * 8 .7 /100 = 1044 (First year completion) ie 1044 / 12 = 87 per month
    Then Second year starting .Principle amount now is = first year contribution + interest that is = 12000 + 1044 = 13044

    In second year interest calculation and third year principle:
    Third year starting principle = principle when first year completion + second year contribution + second year interest
    = 13044 + 12000 + (( 25044 * 8.7/100) /12) * 11 (interest only for 11 month that is divide by 12 get one month interest then multiply by 11 for 11 month interest)
    = 25044 + 1997 = 27222.
    Am i correct or wrong ?, In the above article interest is reduced year by year if the person paying amount before date of 5th of the month. or did i understand i wrong way?

    Reply
    • Harish-No it is not like that. Your first month contribution of Rs.1,000 will earn the interest for whole 12 months whereas second month installment will earn 11 month interest and the same will continue for the rest of the installments. That too if you invest every month within 5th . Now the calculation of first installment will be (Rs.1,000*8.7/100)=Rs.87 (earns 12 months interest)and second installment have interest calculation like (Rs.1,000*8.7/100)=Rs.87/12=Rs.7.25*11 months=Rs.79.75 (earns only 11 months interest) so on for the next months installments. Such accumulated interest+principal will be next year’s principal for 12 months. Rest monthly contribution calculation will continue as said above. So it is not plain calculation, your each month interest will earn according to the month wise.

      Reply
      • Thank you . Now i understood the interest calculation, Thanks a lots again

        Reply
        • Hi basu,
          Q1.
          In above reply you said first year accumulated interest will be added to the second year principle for 12 month
          which means for example if my first year accumulated interest is rs.1000 then In second year each month principle is (firstyear accumulated interest/12)+second year monthly contribution = (1000/12) + 1000(i considered my second year monthly contribution)

          Q2. ppf minimum deposit should be per month is 500 that is rs.6000 per year , max is rs.8333 per month (because yearly limit is rs.10000). what my question is, can i deposit first month rs.6000 then i stop deposit for one year
          then second year rs.6000 then stop for one year? now my assumption is 6000/12 = 500 which satisfy the minimum deposit per month but i paid as lump sum in every year starting as 6000. is this possible or will it affect any interest rate or any terms and condition violation of ppf scheme? or is it mandatory to pay all the month instead lump amount

          Reply
          • Harish-Why so confusing for you. Separate the first year accumulated principal+interest. This amount will earn straight away 8.7% from beginning of month to March 31. Rest of your second year contribution will follow the interest calculation method as of first year. That’s it. If you are planning for lump sum investment then it is always best to invest between 1st to 5th of April. If you do so then it will be considered for interest calculation from the April month itself. So you have an edge of earning more than monthly investment.

            Reply
            • Thanks a lot , Now its clear , I am grateful to you spending your valuable time for clearing my doubts…

              Reply
              • My monthly contribution 3000 per month ,Now i cant afford to pay this amount consistently.
                Q1. Can i Contribute 500 for next month ,1500 for next of next, 1000, 3000 ,500, 0(Note:no contribution in any one of the month not year),then 4000, 3000 next next month in an financial year? That is varies amount in each month but it wont exceed more than 1Lakh in an year , I am aware on that.

                Q2.What will happen if i forgot to contribute for one month ?: Note: Not one year just one month. will have any terms and condition violation?. or do i want get legal permission from the branch which i maintain my account?

                Q3. Is their online banking facility for ppf account?
                Q4. Is it compulsory to enter the transaction info in the passbook ? somebody mention in order to avoid tax need to entire in the bank passbook

                Reply
                • Harish-
                  1) Yes you are right and you can do so.
                  2) Nothing will happen if you forget a month. So don’t worry 🙂
                  3) Few banks provide such facilities like ICICI, IDBI or SBI. So check with them.
                  4) Yes it is best practice to enter it in passbook for taxation as well as for your reference purpose.
                  For detailed view about this product, you can visit my post “All about Public Provident Fund (PPF)“.

                  Reply
                  • I have gone through your link , it is great and i have two question

                    1.Do i need to enter in passbook if i have online statement of ppf account to
                    avoid tax ?(Note: I have ppf account and normal saving account with netbanking facility in sbi)
                    2.Can i make more than one deposit in a month ?(Note: Number of installment only 12 mentioned in your link.it means only 12 deposit(installment) i can make in one year)

                    Reply
                    • Harish-If you have online passbook of PPF then no need to have physical one. Yes you are very much free to increase the frequency of investment within a month also.

  47. Great Job 🙂 keep posting articles like this

    Reply
  48. Sir,
    Will it be a good idea to do a recurring deposit at the end of march in a bank and put the whole money in PPF within 5th of April?
    Regards,
    Pinaki

    Reply
    • And also give me an idea about NPS. I am working in public sector bank.
      Regards

      Reply
      • Pinaki-Do you have mandatory NPS or thinking to open NPS newly?

        Reply
    • Pinaki-I don’t think it is good. Because first thing in all probability your return from RD will be equal (may be slight change) PPF. Second thing, return from RD will be taxable, which is not the case with PPF. Hence I still strongly feel that monthly contribution in PPF holds upper hand.

      Reply
      • thank you for your reply.I have mandatory NPS like all bankers in public sector banks.
        Regards,
        Pinaki

        Reply
        • Pinaki-If you have mandatory NPS then no need to think and contribute it. In other words, it is good in return part but less liquidity and Govt need to work on taxation part. Let us hope for better in future 🙂

          Reply
  49. Hello Basu,

    I opened a PPF account with ICICI bank in Dec 2013. So far, I have deposited 40,000.

    Even tough I started in Dec 2013, my first year in PPF is from April 2013 isn’t? Can I move the remaining 60,000 now to my PPF account with in April 5 2014, to have 1 Lac invested in the first year and to maximize the returns? Can I see the interest credited to my account online? Or should I leave this year and be regular from April 2014 in investing before 5th of every month?

    Not sure, I I articulated my query clearly. To put it another way – ‘Should I invest 60k before the fast approaching April 5 2014?

    -Prabhu.S

    Reply
    • Prabhu-Yes your year start from 1st April 2013 and you have option to complete maximum limit of Rs.1,00,000 within 31st March 2014 (to invest another Rs.60,000). Your interest will get credited after completion of one year. I hope you got the right answer from my end. If you still confused then let me know to discuss further.

      Reply
      • Hello Basu,

        No. That was clear! Thanks much. I calculated that the interest for this year on investing 1L would only be around Rs 600 for the delay I did in opening the account. (Or I should have waited till April 2014 to start my account. , isn’t?).

        And you would advise one that if possible one should do a lump sum investment of 1Lac before April 5?

        -Prabhu.S

        Reply
  50. i have doubt, whether i can invest various amount in each month in FY. i.e one month Rs.5000, next month Rs.3000. in a same FY.

    Reply
  51. Dear Sir, I am a salaried employee working in a private firm. Every two years I have bee changing my job. So fare I have note filed my income tax return. If I need to start doing from this financial year, please advice the way froward. Will I be fined if I file now.

    Thanks and Regards

    Samuel

    Reply
    • Samuel-Filing return is individual responsibility. Let me know in what tax bracket you are into? Whether your employer is deducting TDS every year?

      Reply
  52. Hi Basu,

    Thanks for the monthly split up.

    But this is how I usually pay PPF amt.

    For every FY, i used to wait till Feb – March month and based on my other LIC premiums which will be used to deduct under section 80C, i take the balance amount and put in PPF account to get tax benefit for full 1 lakh.

    Am trying to say that, i used to pay premium only in the FY end and not in the start of the year.

    Could you please tell is it ok or should i change my payment period/time ?

    Reply
    • Yuva-I think you are more concerned about taxation rather than other options of your financial goals. Please come out of dummy products like traditional LIC plans. Buy term plan and restrict your insurance buying to there itself. Invest in PPF as I mentioned above.

      Reply
  53. Thaank u Basu for sharing this wonderful information , I really didn’t have any idea about PPF, but after reading this I got the confidence of investing in PPF. I appreciate ur efforts in this. Can you also please guide on how to invest in mutual fund and other equity products. Thank u again.

    Reply
    • Subir-Equity investments are meant for long term investments like time horizon of more than 7+ years. If you have any goals which are more than the said time frame then you can start investing monthly. If you are first time investor then better to take the help of adviser in your area otherwise you can go ahead with Direct plans which are cost effective than normal plans.

      Reply
  54. Hi,

    I want to invest in PPF for tax saving purpose for year ending 31st March, 2014. If I invest 40,000 today. Will I get tax benefit? Plus, when will I start getting interest on this amount? From April 2014 onwards?

    Also for the next year, is it wise to invest the same amount before April 5, 2014? In that case how the interest is calculated? previous years 40,000+ current year’s 40,000?

    Please guide.

    Thanks,
    Avadhut

    Reply
    • Avadhut-If you invest this month means (as it is already 13th March) your invested amount will start to fetch interest from 1st April 2014. But you can avail tax benefit in this FY as you invested prior to 31st March 2014. The best move to invest in PPF will be, if you are opting for lump sum investment then within 1st to 5th April every year. If monthly contribution then each month before 5th.
      For detailed procedure of interest calculation, you can visit this post “PPF-When to contribute to get higher return?“.

      Reply
  55. HI Basu,

    i made a last minute descison and invested in PPF for a lumpsum of 60k on feb .. so will my intrest be low for the first year and can i make the next investment in april?

    Reply
    • Arun-Yes if you invested Rs.60,000 before 5th of February then you will get interest for months of February and March, otherwise only for March monthly only. Hence it is better if you plan to invest lump sum on yearly base in PPF, better to invest between 1st and 5th of April every year.

      Reply
      • Thank you Basu… one more doubt is for 2013-2014 i have made PPF investment as 1 lakh lump sum in Feb , so can i do a 1 lakh Lump sum in April for 2014-2015 …..

        Reply
  56. Hi ,

    I have two Jeevan Anand policies with sum assured of 3lacs and 2 lacs respectively (16k and 14k premium) . I am planning to paid up the 2 lacs policy and invest the 14k amount in ppf … Is it wise move … Please note that the policy was taken before 5 yrs … 11 yrs premium left.

    Reply
    • Ranjani-My suggestion will be to put around 40% in PPF and rest into well diversified equity mutual fund. You are ready to wait for another 15 years (by putting into PPF), so why can’t take the advantage of long term investment in equity. By doing so you can earn well and diversify your investment also.

      Reply
  57. Mr. which is the best way to inwest in ppf AC. monthly or yearly ??

    Reply
    • Ajay-If lump sum investment then it will be between 1st to 5th of April every year. But if it is monthly, then each month between 1st to 5th. Flexibility of finance will be decided by yourself.

      Reply
  58. I have completedcompleted 15 years and renewed for 5 years and 2 years are left. Should I continue or invest elsewhere. I do take the benefit of the rebate.

    Reply
  59. Hi Basu,

    It seems there is an error in mentioning the 1st year Principal of Mr. X.
    Below thing is mentioned in the page:
    (8000*12)+(4465)=1,00,565
    while it should have been 1,00,465.

    Reply
    • Bharat-Yes you are right but interest will be total Rs.4,472. When you look at different calculators then they show some slight changes in values. Thanks for correcting and I am updated the same.

      Reply
  60. Sir I am able to invest 3000 INR per month. …
    Vill u please suggest me some investment plans? ?

    Reply
    • Punesh-Without knowing your basics I can’t recommend any product. Please do share your goals, current investment, income, family dependents and your risk appetite. Then I will be in a better position to advise you. If you feel not share this personal information on this platform then you can mail me. I will definitely guide you.

      Reply
  61. PPF A\c How Many Time Exentsion

    Reply
  62. The difference elaborated in a clear picture is very nice to understand especially for those who ignores frequently.

    Reply
    • Raveendra-Yes it is ignored by lot. Pleasure if you share this post with your friends too.

      Reply
  63. Very helpful!! Thanks Basu!

    Reply
    • gr8 expo….,thx

      Reply
      • Shiva-Thanks 🙂

        Reply
  64. this one is very good, i already have a PPF account.

    Reply
    • But maintain regularity in investment for your long term financial goals. As it is guaranteed return, invest some percentage of your portfolio investment into this. But dont put all ur eggs in one basket. Maintain that diversification. Thanks for your comment. Hope my future posts will also make you happy.

      Reply

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