Why PPF account holders should Make contribution Before April 5?

Investors should be aware that the minimum balance between the fifth and the final day of the month is used to determine the interest rate on PPF accounts. As a result, when money is deposited before the fifth of the month, interest is paid for the full month. To maximise their investment, those with Public Provident Fund (PPF) accounts must submit their contribution for the fiscal year 2023-24 by April 5. According to the PPF programme guidelines, interest is also computed monthly but only credited at the end of the fiscal year. In order to earn more interest on monthly contributions made to a PPF account, make sure the funds are credited to the account before the fifth of each month.

Every three months, the interest rate on PPF accounts is revised; in this case, we've assumed a yearly interest rate of 7.1%. Thus, the deposit of Rs. 1.5 lakh will generate interest of Rs. 10,650 for the person. The person will thus only get interest payments for 11 out of the 12 months of the fiscal year, with April being an exception. At the current interest rate of 7.1%, this would amount to Rs 9,762.50 for the entire year on a deposit of Rs 1.5 lakh.

One must keep in mind the compounding element because PPF is a long-term investing strategy. The programme has a 15-year lock-in term. Thus, a PPF investment of Rs 1.5 lakh made between April 1 and April 5 of each financial year will earn Rs 18,18,209 in interest and Rs 40,68,209 at maturity. The depositor won't get any interest for the year, though, if a lump sum investment is made after March 5 every fiscal year, for example, near the conclusion of the financial year. If you keep doing this for 15 years, the PPF account will only earn Rs. 15,48,515 in interest and Rs. 37,98,515 at maturity. You may increase the amount of tax-free interest you get by making PPF account investments before April 5.

Moreover, annual lump sum investments will provide larger interest rates than monthly PPF account installments for a person. A person would receive a maturity amount of Rs 39,44,599 if they deposit Rs 12,500 in a PPF before the fifth of every month. By placing a lump sum deposit into the PPF account between April 1 and April 5 of a financial year, the person would receive an additional Rs 1,23,610 in interest.