PPF: Have you invested in PPF? Every year at the beginning of April it is advised that the entire Rs 1.5 lakh should be invested in Public Provident Fund (PPF) between 1st and 5th April. This advice is not wrong. Let us understand why this is said
PPF: Have you invested in PPF? Every year at the beginning of April, it is advised that the entire Rs 1.5 lakh should be invested in Public Provident Fund (PPF) between 1st and 5th April. This advice is not wrong. Let’s understand why this is said.
How is interest calculated in PPF?
Interest is paid only on the amount deposited in PPF account between 1st and 5th of every month. That is, if you deposit money by 5th April, then you will get interest on that money for the whole month. But if you deposit after 5th April, then you will get less interest for that month. Let’s understand this with an example.
If you deposit Rs 1.5 lakh between 1st and 5th April
Suppose, on 1st April 2023, you had Rs 3.5 lakh deposited in your PPF account. Now you deposited another Rs 1.5 lakh on 3rd April, which made your total balance Rs 5 lakh.
Now the interest for the month of April will be calculated like this
(7.1%/12) × 5 lakh = Rs 2,958
If you deposit Rs 1.5 lakh after 5th April
Now suppose, you deposited Rs 1.5 lakh on 9th April. In this case, the balance from 1st to 8th April will be 3.5 lakh and from 9th April to 30th April the balance will be 5 lakh.
Now the interest will be calculated like this
(7.1%/12) × 3.5 lakh = Rs 2,071
How much difference does it make?
You can see that if you deposit money after April 5, you will get Rs 887 less interest. Although this is not a huge difference, but it can gradually increase in the long term.
Is it necessary to invest between 1 and 5 April?
If you have a full Rs 1.5 lakh, then deposit it between 1 and 5 April, so that you get more interest. But if for some reason you are unable to deposit by April 5, then there is no need to worry. You can deposit money whenever you want. If it is difficult to deposit Rs 1.5 lakh at once, then depositing Rs 12,500 every month is also a good option. Investing in PPF between 1 and 5 April is definitely beneficial, but it is not mandatory. If you have money, invest soon. But if not, then even if you deposit later, you will get good returns in the long term.
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