PPF account holders take note! Why you should deposit money by April 5 to maximise interest payout - explained

PPF account holders take note! To make sure that you earn the maximum benefit from your Public Provident Fund (PPF) investments, it is important that you deposit your money into the PPF account by April 5 every financial year. This timing is crucial for maximising returns on their investments.

The PPF scheme calculates interest based on the minimum balance maintained between the 5th day and the last day of each month. Therefore, investors planning to make a lump sum yearly contribution should complete their deposits before April 5 to achieve maximum returns.

This timing is particularly significant for those who prefer making a single annual deposit in their PPF account, as any delay could result in loss of one month's interest on their yearly contribution.

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For PPF account holders who prefer monthly contributions to their PPF accounts, deposits should be completed by or before the 5th of each month to avoid any interest loss.

• If a PPF account holder deposits money on April 15, the interest calculation will consider the lowest balance between April 5 and April 30. Since the balance before the April 15 deposit will be lower, that amount will be used for interest computation. Consequently, the April 15 deposit will not earn any interest for April.
• Conversely, if the deposit is made by April 5, the interest calculation will include this contribution, ensuring the deposited amount earns interest for the entire month of April.

Let’s understand what this means, with the help of an example

As stated above, PPF deposits completed before April 5 or the 5th of each month generate higher interest compared to deposits made afterwards. The difference in interest earnings based on deposit timing is a significant consideration for account holders.

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The interest calculation for PPF accounts happens monthly, with the final credit taking place at the financial year's end. The government conducts quarterly reviews of PPF interest rates.

• At the current PPF interest rate of 7.1% per annum for April-June 2025 quarter, assuming the same rate over 15 years, annual deposits of Rs 1.5 lakh made before April 5 would yield Rs 18.18 lakh in interest.
• However, deposits after April 5 would generate Rs 17.95 lakh, resulting in a reduced earning of Rs 23,188 over the 15-year duration.
• For monthly contributions totalling to Rs 1.5 lakh a year, depositing Rs 12,500 before the 5th of each month accumulates Rs 16.94 lakh in interest over 15 years. Conversely, deposits after the 5th result in Rs 16.70 lakh interest earnings, showing a smaller reduction of Rs 22,475 compared to the annual lump sum scenario.

The tax-free interest earnings from PPF accounts make it a valuable investment option. Account holders who fail to deposit funds before April 5 or the 5th of each month miss the opportunity to maximise their tax-free interest earnings. The yearly investment limit for PPF accounts is set at Rs 1.5 lakh. The minimum annual deposit requirement for a PPF account is Rs 500.