Invest lump sum amount in PPF or on monthly basis?:Trick to earn higher return on investment in this miraculous investment scheme

Public Provident Fund (PPF) is a popular investment option for people looking for fixed and government-backed returns. But the timing of the deposit matters. If you invest the maximum ₹1.5 lakh in a financial year, depositing the entire amount before April 5 can help you earn more interest than investing it in monthly instalments. PPF interest rate is 7.1% The government currently offers 7.1% annual interest on PPF. The interest is compounded annually. However, PPF interest is calculated every month based on a specific rule. This makes the date of deposit important. Under PPF rules, interest for a month is calculated on the lowest balance between the close of the fifth day of the month and the end of that month. Therefore, money deposited after the fifth day does not earn interest for that month. Why April 5 is important Suppose you plan to invest ₹1.5 lakh in your PPF account for a financial year. If you deposit the entire amount before April 5, the full ₹1.5 lakh can be considered for interest calculation for the months of the financial year. This gives the money more time to earn interest. On the other hand, if you invest ₹12,500 every month, the money is added to the account gradually. Each instalment gets interest for the remaining period of the year. This difference can increase over a long investment period. ₹1.5 lakh lump sum vs ₹12,500 monthly If an investor deposits ₹1.5 lakh every year for 15 years, the total amount deposited will be ₹22.5 lakh. However, the final corpus can differ depending on when the money is deposited. Based on the calculations provided, investing the full ₹1.5 lakh before April 5 every year can result in a corpus of about ₹40.68 lakh after 15 years, assuming an annual interest rate of 7.1%. If the same ₹1.5 lakh is invested in monthly instalments of ₹12,500, the corpus can be about ₹39.48 lakh. That means the lump-sum method can result in around ₹1.20 lakh more over 15 years, based on the assumed interest rate. PPF returns based on deposit frequency Note: These are rough calculations based on a 7.1% interest rate. The government reviews the PPF interest rate every three months. Therefore, the actual maturity amount can be different if the interest rate changes. Deposit between the 1st and 4th The fifth day of the month is important for PPF investors. For example, if you deposit your monthly instalment of ₹12,500 on April 4, it can be included in the balance considered for that month’s interest calculation. But if the money is deposited on April 6, the deposit will not earn interest for April under the stated calculation rule. Therefore, investors making monthly deposits should ideally make the payment between the 1st and 4th of every month. PPF has a 15-year maturity period A PPF account has a maturity period of 15 years, excluding the financial year in which the account is opened. After the initial period, the account can be extended in blocks of five years. An investor can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh in a financial year. PPF offers tax-free benefits PPF comes under the EEE, or Exempt-Exempt-Exempt, category. Under this structure, the amount deposited, interest earned and maturity amount are tax-free, according to the information provided. The government reviews the PPF interest rate every quarter. Who can open a PPF account? An individual can open a PPF account in their own name at a post office or bank. An account can also be opened on behalf of a minor. For investors who plan to use the PPF’s full annual limit, the timing of deposits can therefore make a difference to the amount accumulated over the long term.