PPF calculation: Why you should make Public Provident Fund investment before April 5

Public Provident Fund is one of the safest investment and tax-saving options for investors seeking guaranteed returns. By following a disciplined investment schedule, one can accumulate good returns over a period of time.

As per the PPF rules, you can invest up to Rs 1.5 lakh per year in a PPF account. This you can do on a monthly basis or annually.

It has been observed that salaried individuals generally invest in their PPF accounts towards the end of the financial year as a last-minute effort to save taxes.

However, for maximum gains, one should invest at the start of the financial year between April 1 and 4 for maximum gains from the scheme. For following months also, maximum returns would accrue if investment is before the 5th day of the month.

Reason

The interest on PPF deposits gets compounded annually and is credited to the account at the end of the financial year. Deposits before fifth day of the month earn interest for the whole month.

PPF interest calculation

The interest on PPF deposits is calculated on the minimum balance between 5th and last day of the month, according to the rules of the scheme. While this interest is due every month but credited to account at the end of the financial year.

Hence, if you make annual investment in PPF, you should do it before 5th April for maximum gains. In case of monthly deposits, one should do it before the 5th day of the month.

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At present, PPF scheme offers 7.1% interest per annum. It is compounded annually and paid on maturity after 15 years. The scheme also offers investors an opportunity to extend their account beyond the mandatory maturity period in blocks of 5 years each.

You can get tax benefit under Section 80C on PPF deposits. The interest earned and maturity amount is also tax-free. At the current rate of 7.1% interest on PPF deposit, one can accumulate up to Rs 1 crore in 25 years.