Public Provident Fund (PPF) account holders will have to deposit their contribution for the financial year 2023-24 before April 5 to get the most out of their investment.
If the contribution is deposited in the PPF account after April 5 for this financial year, then the account holders will be able to earn less interest than the PPF balance. Explain that investing in PPF account before April 5 will help you earn more tax free interest.
As per the rules of the PPF scheme, the interest on the deposit amount is calculated on the basis of the lowest balance in the PPF account at the end of the month on the fifth day of the month. Therefore, if a person is making a lump sum investment, then he should ensure that the PPF contribution is deposited in the PPF account by April 5.
Let us understand from the example that how much interest will be earned on the PPF account if the lump sum amount is deposited before 5th April. Suppose a person opens a PPF account and invests Rs 1.5 lakh in it on 4th April. The amount is deposited before 5th April. The minimum account balance amount of Rs 1.5 lakh between the fifth day and the end of the month will be used for interest calculation. That is, he will get the interest rate on the amount of 1.5 lakhs.
The interest on PPF account is reviewed every quarter. Here in the example, the annual interest rate has been considered as 7.1 percent. Therefore, the person investing will get an interest of Rs 10,650 on a deposit of Rs 1.5 lakh. On the other hand, if the amount is deposited in the PPF account after April 5, then the person will not get the interest for the first month. For the financial year 2023-24 the person will earn interest only for 11 months. It will be Rs 9,762.50 or Rs 9,763 for a deposit of Rs 1.5 lakh.
The PPF scheme comes with a lock-in period of 15 years. Therefore, PPF investment of Rs 1.5 lakh made between April 1 and April 5 in every financial year will fetch an interest of Rs 18,18,209 and a maturity amount of Rs 40,68,209.
If a person makes a PPF investment of Rs 12,500 before the 5th of every month, then the person will get the maturity amount of Rs 39,44,599. A person will earn an additional interest of Rs 1,23,610 by making a lump sum investment in a PPF account between April 1 and April 5 of a financial year.
