PPF Interest: Investors should note that the interest rate on PPF accounts is calculated on the minimum balance between the fifth day of the month and the last day of the month. Hence, when one deposits money before the 5th of every month, he can earn interest for the entire month. Let’s know about it in detail.
Many people of the country invest in the PPF scheme. At the same time, people also get a lot of benefit through this scheme. Meanwhile, people investing in PPF should take special care of the date of April 5. In fact, investors investing their money in the centrally supported Public Provident Fund (PPF) scheme are always advised to invest by April 5.
This is because if an investor deposits the entire amount of Rs 1.5 lakh between April 1 and April 5, he or she gets the benefit of the interest added to the contribution made before the fifth of the month. So he can earn more interest and get the most out of the investment plan.
PPF Scheme Rules
Investors should note that the interest rate on PPF accounts is calculated on the minimum balance between the fifth day of the month and the last day of the month. Hence, when one deposits money before the 5th of every month, he can earn interest for the entire month. But if one does it after the fifth day of the month, he/she will lose the substantial interest income for that particular month. Due to which there is loss of money.
PPF Scheme
The rules of the PPF scheme should be noted that the interest is calculated on a monthly basis, but is credited to the investor at the end of the financial year i.e. on 31st March. So, if a person is investing on a monthly basis, he/she should ensure that the money is deposited before the 5th of every month to earn higher interest.
5 April and annual interest
Based on the above principle, when an investor deposits Rs 1.5 lakh before April 5, he will earn interest at the rate of 7.1 percent (current interest rate) on the lowest account balance between April 5 and the end of the month. For example the minimum balance is Rs 1.5 lakh.
As per the rules, an investor will get an interest of Rs 10,650 on Rs 1.5 lakh deposited before April 5 at the end of the financial year. On the other hand, if he does this after April 5, then he will have to lose the interest of the first month.
PPF interest
Then for the entire financial year the person will earn interest only for 11 months, which will not include the month of April. For the full year, this would work out to Rs 9,762.50 on a deposit of Rs 1.5 lakh at the current interest rate of 7.1 per cent.
Compound interest
PPF scheme is a long term investment scheme and is based on the principle of compound interest. The scheme has a lock-in period of 15 years. If an investor invests periodically and systematically for 15 years between April 1st and April 5th every year, he can earn Rs 18,18,209 on maturity at the end of 15 years and a maturity amount of Rs 40,68,209 .
interest amount
However, if the investor does it at the last minute in every financial year for 15 years, he will get an interest of Rs 15,48,515 instead of Rs 18,18,209. The maturity amount will also be Rs 37,98,515 instead of Rs 40,68,209.
investor
Also, investing in one go in every financial year is also preferable to monthly deposits. If a person invests Rs 12,500 in PPF before the 5th of every month, the person will earn an amount of Rs 39,44,599 at the time of maturity after 15 years.
Whereas, he can earn an additional interest of Rs 1,23,610 by making lumpsum investment in PPF account between April 1 and April 5 of a financial year.
