PPF Investment: A Public Provident Fund i.e. PPF investment is a great option while saving money for the future. It gives returns with a government guarantee. However, it is very important to understand the calculation of interest on PPF. If you invest in PPF at the beginning of the new financial year, then you get tremendous interest. April 5th has a special role in this. The question is, what happens in this account on the 5th (How to invest in PPF), that every PPF account holder needs to understand it? Let us know.

How much interest is available in PPF?

By investing in a PPF account, you will get interest at the rate of 7.1 percent. Every time the rates of small savings scheme change from the beginning of the financial year i.e. the month of April, but this time also the government has not made any change in the interest rates of PPF. The government revises the interest rate on small savings schemes and PPF every quarter and changes it according to the need.

Now understand the 5th date funda in PPF.

The calculation of interest rates on PPF is done every month. However, this interest is credited to the account at the end of the financial year. The 5th date plays an important role in calculating how much interest will be received on PPF. Interest is paid on the lowest balance of the PPF account between the 5th and the last date (30th or 31st) of every month. This is the reason why one should invest in PPF on or before the 5th so that you can get the maximum benefit of interest.

Understand with an example.

Let us assume that you put Rs 1.5 lakh in PPF on or before 5 April. In such a situation, at the rate of 7.1 percent, you will get a total interest of Rs 10,650 for the current financial year. On the other hand, if you deposit this money on 6th April or any day after that, then you will get interest for only 11 months of this financial year. In this case, you will get interest of Rs 9,763. Meaning, in such a situation, you will get less interest of Rs 887.

Should you invest once or every month?

If you want to earn more interest on PPF, then it would be better if you invest the entire amount once at the beginning of the financial year. This is because if you invest Rs 1.5 lakh for the whole year on or before 5th April, then you will get interest on the entire amount. On the other hand, if you deposit money in installments every month, then the interest you get will be less. So if you have money, then investing in one go will be beneficial, whereas if you do not have much money, then you can choose the method of investing every month.

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