How does investing in PPF by April 5 maximise your interest income? Key questions answered

As the new finance year (2025-26) has kicked off and majority of salaried individuals are likely to go with new tax regime. They tend to believe that they have a lower incentive of investing in tax-saving instruments such as Public Provident Fund (PPF). It is important to note that investment in PPF may not give you tax benefit but the interest income will still remain tax free even in the new tax regime.

Moreover, with markets being volatile, conservative investors have all the more reason to invest in instruments which offer assured returns – 7.1 percent in case of PPF.

How is interest calculated on investment in PPF?

Interest is calculated on a monthly basis on the minimum balance between 5th and the end of the month.

Is the interest transferred every month?

Although interest is calculated every month, it is transferred to your account every year on March 31.

Why should investors invest before April 5?

Those who invest in PPF during the year should not bother much about April 5. However, those who invest lumpsum once in a year (upto ₹1.5 lakh in a year) should ensure to invest on or before April 5.

This is because when you invest after April 5, your contribution does not get added to the interest calculation for April. Therefore, you miss out on the interest component for one month.

Does this apply to all investors?

It typically applies to investors who opt for lumpsum investment and interest on a large amount for one month is of some significance as we explain below. However, those invest on a monthly basis are not influenced significantly since the contribution in April would presumably be smaller.

How much interest is given on PPF investment?

Currently, the interest on PPF is 7.1 percent per annum.

How much difference does it make by investing before April 5?

If you have invested ₹1.50 lakh during the year, your interest receivable for one month would be 7.1 /100 X 1/12 X 1.5 lakh = ₹887.5. So, investing after April 5 would lead to loss of ₹887.5. Additionally, when this amount is added to your PPF acccount in May, interest calculated on the next month will stand to be higher since the minimum balance on 5th of May would be higher by ₹887.5. This will lead to compounding effect.

Therefore, it is recommended to invest in PPF before April 5, and rightly so.

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