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 🙂
EPF Scheme 2026 explained fully: EPF withdrawal, EPS pension, and EDLI insurance changes with examples,…
Chasing financial freedom? Do health, time, relationships and contentment matter just as much? Sadly, we…
Your "safe" SIPs, SGBs, PPF, or Index Funds are secretly sabotaging your wealth. Peltzman Effect…
Thinking your retirement plan is foolproof? Why LUCK - not asset or fund selection or…
Nifty 50 Index Funds Vs Active Large Cap Funds — Can we really compare them…
Should you pick Nifty 500 Multicap 50:25:25, Nifty 500, or Nifty LargeMidcap 250 Index Fund?…
View Comments
Dear Sir
I an earning and deposit 1.5L in my PPF
My wife also earns and deposits 1.5L in her PPF. We both get 80c deduction on our contribution in our accounts.
Can I deposit 1.5L to her account? and will she get interest on that amount? I understand that I wont get any 5ax deduction on this additionaln1.5L
Similarly can she deposit 1.5L to my account? Will i get interest on that additional 1.5L also?
Kindly reply and oblige
Please advise if I open PPF acct on 10th feb 2023 and deposit 1.5 lakh. Will I be able to deposit 1.5 lakh in the month of April 2023. Will it be beneficial or not.
Dear Vinod,
Yes, you can do so. Beneficial or not depends on your financial life.
I opened my ppf on dec 2021 and i made lumpsum deposit of 1.5 lkhs during 24 -28 march 2022 . Its april mid still im not getting any interest reflecting in my account. Will i get inetrest for the whole 2020-2021 fy or ill loose some of it
Dear Sanish,
As you deposited after 5th of March, the interest will start to earn from April.
I had opened ppf account in 2013, but as per today I have only 2 lac in that account. The maturity year is 2028, should I invest 50 k per year to get maximum return or should I invest this amount in sip or try some other options.
Dear Raj,
Invest as per your comfort and investment purposes rather than BLINDLY.
What if I invest sum total of 150000 lakhs before 5 April in Financial year in one go then the monthly contribution ?
Will it make a difference ?
Dear Nitesh,
If you invest Rs.1.5 lakh before 5th of April, then it will be beneficial as it starts to earn the interest rate from the day one itself.
I opened ppf account on may 2021 then maturity year will be 2037 I deposited 150000. Should I have to deposit for 16 yrs ? Or stop deposit on 2036? How they calculate interest? I'm really confused
Dear Paul,
You can invest up to 31st March 2037.
Monthly investment is beneficial or lumpum amt is beneficial in ppf
Dear Nishu,
Invest which is comfortable for you.
Hi sir,
if I made first month deposit on 17th April, can i make next deposit on or before 5th of the next month i.e. May before 5th? or should i wait for completion of 30 days?
Dear Chandana,
Why to wait?????
Dear Sir,
I want to invest lump sum(1,50,000) amount in PPF and missed the April 1-April 5, 2021 duration. If I open the account on May 1st, 2021 and invest the same amount, can you help me determine the amount I will lose at the end of 15 yrs years for not opening the account on April 1st, 2021. Where can I find the formula for this calculation?
Thank you.
Dear Santosh,
Calculate on your own. I can't do calculations for each individual. However, losing one month's interest on your Rs.1.5 lakh is too small and you can't recover it. Hence, rather than scratching your head too much on such issues, start PPF and invest NOW.
Thank you Sir.
Hi Sir! I created my PPF account on March 1, 2021 and deposited Rs.10,000 in it. Since I didn't know that the interest rates are calculated for FY 2020-21, I couldn't deposit the rest of the amount (Rs.1,40,000) in it before March 31, 2021. So for the first FY, the interest rate will be calculated only for Rs.10,000 right? Is there any way I can deposit the remaining amount now for the last FY?
Dear Srrayvinya,
So for the first FY, the interest rate will be calculated only for Rs.10,000 right? - YES
Is there any way I can deposit the remaining amount now for the last FY? - NO.