There is a great confusion among investors on **how PPF interest is calculated** ? Just because a lot of investors don’t know this , they have questions like *“what is the best time to invest in PPF to get maximum interest”* or *“Should they invest in lump sum or monthly?”* . Once you know the procedure and exact ppf interest calculation method, life will be easy. Let me explain with examples how its done and also give you a ppf interest calculator in a excel sheet format at the end.

To explain in one line – *“PPF interest is calculated monthly on the lowest balance between the end of the 5th day and last day of month, however the total interest in the year is added back to PPF only at the year-end” *

**Excerpts from Official PPF page**

8. Interest– Interest at the rate , notified by the Central Government in official gazette from time to time, shall be allowed for calendar month on the lowest balance at credit of an account between the close of the fifth day and the end of the month and shall be credited to the account at the end of each year

What this means is that the interest is not compounded monthly ! . While there is no ppf interest calculation formula, but the way its calculated is very simple ! . The interest earned in a year will added back to final amount only at the end of the year. Thats the only catch ! .

So lets see 3 different kind of cases where money is invested in PPF differently and see how the interest is calculated and added back to PPF account at the end of the year. We will see these 3 cases

**Case 1** : Rs 60,000 deposited once on 1st Apr

**Case 2** : Rs 5,000 deposited before 5th of every month

**Case 3** : Case 3 : Rs 5,000 deposited **after** 5th of every month

The following examples give all the 3 cases examples assuming investment of Rs 60,000 in a year , but invested differently. I have taken interest at 8.6% per annum . Recently the PPF interest rate was increased to 8.6% and the limit was raised to Rs 1,00,000 and its now applicable from Dec 1, 2011 . So if you have invested Rs 70,000 earlier in this year , you can still invest Rs 30,000 more in your PPF account.

**Note** : Interest assumed is 8.6% for all the 12 months. However in reality it might happen that it may change in between for some months due to changes from govt.

### Some Important Points on PPF Interest Calculation

- If you are investing in PPF on monthly or several times a year, before 5th or after 5th will not matter a lot , it would be just few hundred rupees.
- If you are investing your money in lump sum on yearly basis, it would be better if you can invest before the 5th of April, this will make sure that you earn interest on more balance for the month of Apr.
- The interest on a particular month depends on the interest rate applicable for that month, if PPF interest rates change in between , then there might be different rate applicable from a point onwards.

Vikas

Hello Manish,

I wanted to know, if ppf is a good investment option. Or should we go for mutual funds only.

Manish Chauhan

What is meant by GOOD here ?

Karthik

I had opened an PPF account on March 17th 2015.Where can i get a maturity chart calculation?Can i check in concern bank thorough online?

Manish Chauhan

As far as I know PPF does not have anything like that. Its not a scheme which has future projections !

subhendu chatterjee

I am investing 2000 every month in my PPF and 500 in my wife PPF account in state bank within 3rd of very English calender month . my age is 34 so how much i able to get after 26 years from PPF if interest by the gov’t. Not changed in future. Please reply.

Manish Chauhan

Hi subhendu chatterjee

I suggest you apply the compound interest formula to compute that !

s robindro

it is very helpful. i has cleared my long time doubt about the interest calculation of PPF.

Manish Chauhan

Thanks for your comment s robindro

Gaurav Topiwala

Very Informative.

Thank you.

Manish Chauhan

Thanks for your comment Gaurav Topiwala

A.K.S.Bhatia

My PPF balance forward on 1.4.14 was 956606 ,for the year 2014-15 the interest was 8.7 % pa.Please tell me ,this 956606 will have a simple interest for 12 months or will be compounded on monthly basis .

Thanks.

Manish Chauhan

It will be compounded

sandeep

hi,

I am not receiving the interest as stated. SBI credits only 6.25% and 6.5% pa. I do yearly deposit in the month of Jan or Feb. What ever is the amount before March 31 of previous year along with interest, I get interest of only 6.25 and never 7%. Is there a way out?

regds,

sandeep

Manish Chauhan

I am not clear on that .. better check with SBI on this

Arun

The limit of 1.5 L is for a FY so anything before 31st Mar should be included in that FY. The PPF interest calculator http://img.jagoinvestor.com/files/ppf-calculator-jagoinvestor.xls can be used to calculate the interest accurately.

Subash

Hi Arun,

Thanks for ur comment. As per your info the money Rs.13000 which i invested in mid of Mar’14 will be accounted for FY 2014-2015 but there wont be any interest for this money….

If its true, Then i can invest 1.5L between 1-4 April’15 which will be accounted for FY 2015-2016…

Pl confirm.

Thanks,

Subash

Subash

Hi Manish,

Thanks for your valuable input. It is really helpful. I have 2 queries… I opened a PPF account on 5th April’2014 in SBI bank with a initial deposit of Rs.500….Then during 5th Nov’2014 i have deposited 1,20,000…. Also I have made a deposit of 13000 during 20Mar’2014….My Query is

1. Whether the last installment 13000 will be accounted for 2014-2015 or else it will be accounted for 2014-2015.

2. If its true should i have to invest only 137000 on 4th-April’2015 as one time or else can i invest fresh 150000 on 4th April’2015.

3. Since i opened my account on 5th April’2014…..whether that 1 day will be counted for 2013-2014…

Kindly suggest ASAP.

Thanks,

Subash

Manish Chauhan

1. In 2014-2015

2. No , you still need to put all 1.5 lacs , if you want to put maximum

3. Not sure

sharma ak

hi, can you explain if i deposit 1 lakh at the end of march e.g. 25march 2015.

then how much total interest i will get in year 2014-2015?

Manish Chauhan

For 6 days.. should be around Rs 100 rupees I guess

bineet_mehra

I got interest on PPF acount credited in my account on 31 March 2013(from my Account statement), So i will declare it in ITR of Assessment year 2013-2014, given the fact that Previous year in which this interest was credited is 2012-2013(1 April 2012-31March 2013) ?

Manish Chauhan

Yes

bineet_mehra

thanks Manish !!

ajay

how to calculate RATE OF INTEREST of recurring deposit.

Suppose I’m investing 2500 per month in recurring deposit account for 2 years with rate of interest 8% compounded quarterly. Now I have to find out MATURITY AMOUNT. For this i will use formula :

ACTUAL AMOUNT (MATURITY AMOUNT) = PRINCIPLE AMOUNT *( (1+RATE/100/4)^(4*2)-1)/(1-(1+RATE/100/4)^(-1/3))

ACTUAL AMOUNT (MATURITY AMOUNT) = PRINCIPLE AMOUNT *( (1+8/100/4)^(4*2)-1)/(1-(1+8/100/4)^(-1/3))

ACTUAL AMOUNT (MATURITY AMOUNT) = 65229/-

========================

Now I want to know the FORMULA OF HOW TO CALCULATE RATE OF INTEREST.

Suppose I’m investing 2500 per month in recurring deposit account interest compounded quarterly. My MATURITY AMOUNT IS 65229/-.

But i don’t know what INTEREST RATE I HAVE GOT. I want to find out INTEREST RATE . WHAT FORMULA SHOULD I USE TO FIND OUT RATE OF INTEREST

PLEASE REPLY.

Manish Chauhan

Hi ajay

Check this out with your bank . It must be mentioned in the RD certificate

Arun

I have a PPF account with a Post Office they refuse to accept the contribution before 1-Apr for the next FY. If I deposit a cheque on 1st Apr it wont be cleared before 5th. Is there a way to make a non-cash contribution before the 5th? If not on this occasion by having a SB account with the same post office and giving a cheque from that account expedite the process?

Anand

A local cheque should get cleared within 2 days. Alternatively, you can transfer the PPF account to SBI so that online transfer can be availed.

Is your cheque not local?

Arun

Past experience says a contribution done via a local cheque shows up for debit after 7-10 days (probably because of movement delays across POs). Transferring PPF to a bank is a long term solution. I was prepared to make the contribution now also but they are not ready to accept it.

Manish Chauhan

Hi Arun

I am not sure on this