The rules say that interest is calculated on the PPF deposit on the 5th of every month and only on the minimum balance till the end. Thus, any lump sum investment made before April 5 (but after April 1) will be used to calculate interest for that month i.e. April and the rest of the financial year.
PPF Account: If you have opened a Public Provident Fund ie PPF account, then it is important for you to know that interest is available for the entire financial year only after depositing money in the account till April 5. If one has failed to deposit the maximum amount of Rs 1.5 lakh during this period then he should try to deposit the maximum amount within this limit.
What are the rules
The rules of this scheme say that interest is calculated on the PPF deposit on the 5th of every month and on the minimum balance till the end of it. Thus, whatever lump sum investment is made before April 5 (but after April 1), this deposit will be used to calculate interest for that month i.e. April and the rest of the financial year.
When do not get 12 months interest
But, what to do if you forget to deposit the lump sum amount before April 5. In such a situation, you should deposit the money as soon as possible before the next month i.e. 5th of May. By doing this, you will lose only the interest for the month of April. The amount deposited in the PPA account in subsequent months (after April) on or after 5th will earn interest from the same month. You will not get interest for the full 12 months of the financial year.
Let us now understand with an example that how much will you lose if you are not able to deposit the maximum amount from 1st April to 5th April and instead deposit it in the last month of the financial year i.e. March.
How much will be the loss if the money is not deposited till April 5
Suppose you invested Rs 1.5 lakh in PPF account on 20th April. At present, 7.1 percent interest is available on PPF account. Since you could not deposit the money before April 5, you would get 11 months of interest. In such a situation, you will get Rs 9,762.50 interest for 11 months. You will not get the interest for April.
Now suppose you deposited Rs 1.5 lakh on March 1, 2023 for the financial year 2022-23. In such a situation, you will get interest of Rs 1.50 lakh only for the month of March, which is Rs 887.50.
How much is the interest for the whole year
If you had deposited the money on or before April 5, 2022, you would have got an interest of Rs 10,650 for the whole year.
Thus, if you miss the date of April 5, you will lose Rs.887.50 by depositing money in April or by May 5. But, if you deposit Rs 1.50 lakh at the end of FY 2022-23 or before March 5, you will lose 11 months of interest and get only Rs 887.50 as interest.
More losses in the long term
It is to be noted that the interest of Rs 887.50 is not much, but remember that the condition of lock-in period of 15 years is applicable on PPF account. In such a situation, due to compounding, you can do a lot of loss.
If we assume interest of 7.1 per cent during the lock-in period of 15 years, then every year on April 1st, a depositor of 1.5 lakh will get Rs 40,68,208. On the other hand, one who deposits Rs 1.50 lakh in PPF account on March 31 every year will get Rs 37,98,515. Thus you will have a loss of Rs 2,69,693.
