Have you invested in a Public Provident Fund (PPF) yet? Every year, it’s recommended that you invest the full Rs 1.5 lakh in your PPF account between April 1st and 5th. Why? Let’s break down why timing your investment during these days matters.
How Is Interest Calculated in PPF?
Interest in a PPF account is only calculated on the amount deposited between the 1st and 5th of each month.
This means if you deposit your money by April 5th, you’ll earn interest for the entire month. However, if you deposit after April 5th, you will miss out on interest for the first few days of the month.
Example to Understand the Difference
Depositing Rs 1.5 Lakh Between 1st and 5th April: Suppose your PPF balance on April 1st, 2023, is Rs 3.5 lakh. You add Rs 1.5 lakh on April 3rd, bringing the total to Rs 5 lakh.
Interest for April: (7.1(7.1%/12) × 5,00,000 = Rs 2,958
Depositing Rs 1.5 Lakh After 5th April: If you deposit the Rs 1.5 lakh on April 9th, your balance from April 1st to 8th will be Rs 3.5 lakh, and from April 9th to 30th, it will be Rs 5 lakh.
Interest for April: (7.1(7.1%/12) × 3,50,000 = Rs 2,071
How Much Does This Matter?
By delaying your deposit until after April 5th, you would lose out on Rs 887 of interest for the month.
While this difference may seem small at first, over time, this can add up, especially if you continue to invest regularly.
Is It Essential to Invest Between April 1st and 5th?
It’s definitely beneficial to deposit the full Rs 1.5 lakh between April 1st and 5th to maximize your interest.
However, if you’re unable to deposit by then, don’t worry. You can still invest anytime during the year, and your PPF will continue to provide good returns in the long run.
If depositing Rs 1.5 lakh all at once is difficult, consider investing Rs 12,500 every month to reach your target.
In conclusion, while investing between April 1st and 5th is a good strategy, it’s not mandatory.
The key takeaway is that even if you deposit later, you’ll still benefit from PPF’s long-term growth.
