Public Provident Fund: Why you should invest in Public PPF account before fifth of every month?

Public Provident Fund (PPF) news: Individuals who invest in PPF should always try to deposit the moneyb in their PPF account before or on the fifth of every month. This helps gain interest benefits for that month. Your money in a PPF account earns a 7.1% interest. The government decides the interest rate each year and adds it to your account on March 31st. But it's calculated every month.

Archit Gupta, Founder and CEO, Clear said if you invest in PPF account before the 5th of every month, your deposit will be considered for the interest calculation of that month. However, if you miss the deadline, you will miss out on the interest for that month. Therefore, investing in a PPF account before the 5th of every month helps you maximize your returns.

Imagine you have ₹1.5 lakh to invest in a PPF account. If you invest it on April 20th, you will not get the 7.1% interest (current interest on PPF account) for the whole year because you missed the April 5th deadline. You'll only get the interest for 11 months. That means you'll earn ₹9,762.50 for FY2023-24. Had you invested before April 5th, you would have earned ₹10,650 in interest. If you wait until March 1st, 2024, to invest, you'll only get the interest for one month, i.e. ₹887.50.

“The interest on the same amount, if compounded over a long period, could make a significant difference to one’s overall return,” said Archit Gupta.

It is always advisable to invest in the PPF at the beginning of the year. This way you will be earning interest on the deposits for the entire year.

Therefore, investors who intend to make a lump sum investment in PPF must preferably do it before April 5th to make the most of the interest. As for monthly instalments, money must be deposited before the 5th of every month, explained Gupta. 

According to Amit Gupta, MD, SAG Infotech beginning the year with a PPF investment is always a good idea. By doing this, you may receive interest on your deposits for the whole year. To maximise the interest, investors who anticipate making a lump sum PPF investment should ideally do so before April 5. Money must always be paid before the fifth of every month for monthly instalments.

PPF and income tax benefits

Most of the time people make bulk investments in their PPF account at the end of the financial year in the month of March to claim deduction under Section 80C. One can claim a tax deduction of up to Rs1.5 lakh on investments made in the PPF account in a year. PPF is a retirement-focused investment instrument that comes with Exempt-Exempt-Exempt (EEE) status. The maturity amount and the overall interest earned during the investment period are tax-free.