PPF or Public Provident Fund is a suitable option for investors looking for long-term savings and they have an opportunity to earn a little extra. The simple yet effective method is to deposit money in PPF before the 5th of every month, which aids in boosting your returns over the years. PPF or Public Provident Fund is a savings scheme that is used for tax benefits and stable returns. Currently, it provides an interest rate of 7.1 percent for the next quarter from April to June 2026. This scheme is applicable to run for 15 years and can be extended for the next five years.
How PPF (Public Provident Fund) Interest Rate Is Calculated
One simple rule that investors always miss is to know how PPF interest rate is calculated. The interest gets calculated on the lowest balance between the 5th and the last day every month.
This makes your deposit date important. If an investor invests between 1st April and 5th April, then their money will start growing from April itself. But if an investor plans to deposit money after 5th April then the interest would be calculated from May. This results in loss of one month's interest rate for that particular financial year.
The impact might look marginal at first but then it becomes clearer with numbers. Before 5th, you can invest maximum Rs 1.5 lakh and your money earns interest for the whole year. This comes to around Rs 10,650 for a year at a 7.1 percent interest rate.
If you deposit the same amount on 6th April then the interest rate will be calculated for only 11 months and the earnings will be Rs 9,763. The difference is Rs 887.
How Long-Term Savings Get Impacted
The investment benefit is more visible after 15 years. This is because once you invest Rs 1.5 lakh at the start of financial year then your total investment will be around Rs 22.5 lakh. It will grow to Rs 40.68 lakh. The interest that you will earn would be around Rs 18.18 lakh. This happens because your money grows yearly and compounds. The first deposit compounds for the complete 15 years, and the second would compound for 14 years.
Even if you decide to delay your investment every year by a few days, then your money would earn a lower interest rate. This might bring down the maturity amount to Rs 37.80 lakh. This investment delay in the Public Provident Fund will cost you a loss of Rs 2.9 lakh over the entire tenure.
|