PPF Investment: Deposit Money in your PPF Account before 5th April for not to lose money in Lakhs

The Public Provident Fund (PPF) is a popular investment preference, particularly for those seeking tax-free returns with a sovereign guarantee. PPF interest is tax-exempt, thus timely deposits are essential for maximizing tax-free returns.

Thus, Individuals making an investment in Public Provident Fund accounts for the current FY 2024-25, must ensure that their money is credited into the account before April 5. This is because investments placed before this date might provide PPF account holders with better interest earnings. The maximum annual investment in a PPF account is Rs 1.5 lakh.

But did you know that the date of your PPF deposit can affect the interest rate you get, particularly if you want to make a lump sum investment in PPF?

Let’s clarify this:

The PPF Scheme calculates interest based on the lowest balance between the 5th and end of each month. As a result, investors who choose lump-sum payments for the entire financial year must deposit by April 5 in order to maximize returns. According to the report, any delay could result in the loss of one month’s interest on the annual deposit, especially for individuals making single annual bulk contributions.

Similarly, people making monthly contributions should make their payments on or before the 5th of each month to avoid losing interest.

Consider this example: if a deposit is made on April 15, the interest computation will take into account the balance prior to the deposit for the month of April, resulting in no interest on the additional April contribution. Deposits made on or before April 5 will earn interest in April, increasing overall PPF returns.

PPF Calculator: How to not Lose Lakhs in Interest

Interest in a PPF account is calculated monthly but credited annually, and the government reviews rates quarterly.

Assume a steady interest rate of 7.1% per year for 15 years. An individual who deposits Rs.1.5 lakh annually (upper permitted) before April 5 will earn Rs 18.18 lakh in interest over a 15-year period. In contrast, deposits made after April 5 would yield only Rs.15.84 lakh, resulting in a loss of Rs 2.69 lakh over 15 years.

Similarly, monthly payments of Rs.12,500 (Rs 1.5 lakh per year) done before the 5th of each month result in a total interest of Rs.16.94 lakh over 15 years. Making deposits after the fifth of the month reduces interest revenues to Rs.16.70 lakh, resulting in a loss of Rs.24,005 for the period.