Investing in PPF? Here’s how you can earn maximum interest
New Delhi: Public Provident Fund (PPF) is one of the most popular long-term investment instrument in the country. With a maturity period of 15 years, PPF offers exempt-exempt-exempt (EEE) income tax benefits. Also, since it is a government-backed investment scheme, it offers guaranteed returns on your deposits.
The PPF interest rate is decided by the government and it is revised for every quarter depending upon the yield of government securities. For the April-June quarter, the government kept the PPF interest rate unchanged at 8 per cent.
If you have a PPF account, here’s how you can earn maximum interest on your deposit
It may be noted that the interest earned on PPF deposits is calculated every month but is credited to the PPF account only at the end of the financial year. The interest is calculated on the minimum balance in the account every month between the fifth and the end of the month. This means that the interest for the month will only be payable if made before the fifth of that month.
Subscribers of PPF should note that it is beneficial to make monthly deposits before the fifth of every month as the interest rate (8%) offered on PPF deposits is calculated on the minimum balance in the account before the fifth of every month. What this essentially means that if you have Rs 1,000 balance in your account as of the fifth of the month, the interest will be calculated on that amount. However, if you succeed in depositing money before fifth, then the interest will be determined on the new minimum balance.
While many people ignore depositing a small amount before the fifth, thinking it does not make much of a difference. However, in reality, subscribers end up losing on thousands as the addition of a few hundred rupees could translate into a much bigger return after 15 years, which is the full tenure of a PPF.
Paying a monthly deposit of Rs 10,000 before fifth from April to March could add up to Rs 5,200 by the end of 12 months as compared to Rs 4,400 if you deposit after fifth. This means that you earn Rs 800 extra every year and if the interest rate remains at 8 per cent for the whole tenure and you deposit the same amount before the fifth of every month, you will be able to earn up to Rs 12,000 more.
The government has set the date as the fifth of every month for depositing and availing the added interest benefit as it is the best time for salaried individuals to deposit the money.