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.

Srinivas

Let us say, my PPF account is on extension after completing the 15 year period on ” without” contribution basis. Lat us say, I would like to withdraw the entire amount in the middle of third year ( assume after 2 years and 4 months of original maturity)of my extension. At this juncture, will the interest be calculated for 4 months also and given at the time of closure? I am asking this question as you gave stated that PPF interest is calculated on a monthly basis but credited only at the end of the year.

ARVIND

hi MANISH..

if i made two or more deposits in a single month then what will be the calculation of interest ?

e.g.

If i made deposits in Jan month as:- Rs. 1000 on 1 Jan 2016, Rs. 1000 on 14 jan, Rs.3000 on 28 Jan 2016, then what will be interest calculation and how? pls answer as I have done this & don’t know the value of interest

Manish Chauhan

Does not matter.. They will just see what is the amount on 5th and give interest on that .

AratiD

Hi Manish, I read this article and the one on RD. Have decided to do a RD of 5000 from Jan 2017 to March 2018 and put the proceedings in PPF before 5th April 2018. Is it correct thinking ?

Manish Chauhan

Why are you complicating it so much, how will it help ?

manish

Hi Manish,

what is the password? I am unable to edit in the sheet.

Debaleena

Hi Manish,

Can you please share the password to the protected sheet? I am unable to edit it.

Manish Chauhan

All the editable part which is needed by investor are unlocked.

Manish

Joe

Hi Manish, Good explanation on the interest calculation. I want to know whether the interest is compounded in PPF.

for an example, If I invest 50000 before April 5 and get 4300 as interest at the year end and next year I invest another 50000 before April 5. So how much interest I will get at end of the 2nd year. 8.6% of 100000 or 104300 ?

Manish Chauhan

Yes interest is compounded on PPF !

souma

if an EPF doesn’t operate once in a financial yr, but it has balance, then is it earn any interest at the year end?

Manish Chauhan

Yes

Rahul

Hi Manish,

i have a PPF account from 2014. At the end of 14-15 the balance was 42000.

In Feb 2016 in put 35000 in this account and in March 2016 I put 15000. So the total of amount was 92000 at the end of MARCH 2016.

How the Interest will be calculated for this balance?

Manish Chauhan

Is the interest calculation process not clear from the article ? Its calculated per month !

vikram

hi manish,

thank you for this explanation

one query, i plan to open a ppf account now on 9th march 2016. will i get any interest on investment this financial year 2015-16 ?

Manish Chauhan

No

SankitK

If you had opened it before 5th of March then you would have earned interest for the month of March.

Tegbir

Hi Sir,

If i invest 1.5 lakhs in NSC under 80 C (Interest won’t be taxable ), and 1.5 lakhs in PPF (Don’t available 80 C, as limit under 80 C is 1.5 lakhs only), so is it possible to invest 3 lakhs for saving purposes .

Thanks

ASHWANI

YA YOU CAN BUT REBATE IN INCOME TAX IS ONLY UP TO 1.50 LAKHS

Manish Chauhan

YEs, you can do that

aarti

Hi, I have opened my ppf a/c in January 2014. Which will be maturity date of my PPF

Manish Chauhan

Hi aarti

This answers your query http://www.jagoinvestor.com/2014/12/ppf-maturity-date-calculation.html

Hitesh

Great lovely explanation. You are awesome man. One query- what if I transfer more than 1.5 lac to ppf for a year through netbanking. Will it be rejected since there is cap of 1.5 lac a year.

suresh

Yes it would be rejected. the system won’t allow more than 150,000

Manish Chauhan

No , it will not be rejected !

Ankur

It won’t be rejected but does the interest will be provided on any amount above 1.5 lacs?? Lets say I try to deposit 200000 in PPF on 1st April 2016. Will the interest be given on 2 lac or only on 1.5 lac?

Manish Chauhan

No , I dont think so ..

Hermione

Through netbanking, it doesn’t accept over the prescribed limits… I tried doing that… it simply says the transaction is not successful and refunds amount if at all it was deducted…

Pintu

My ppf account open on 24-12-2015.which will be maturity date?

Suresh

The PPF account is for at least 15 years and once it get matured you can extend if for next 5 years. that is optional.

Manish Chauhan

Check this http://www.jagoinvestor.com/2014/12/ppf-maturity-date-calculation.html

vidya

Best explanation on PPF I have found on internet.Thanks a lot !!

Manish Chauhan

Glad to know that vidya ..

Aniket

thanks so much, this is the best explanation indeed

Manish Chauhan

Thanks for your comment Aniket

pradip

Very good article!!! thanks a lot. I have a query. Suppose someone transfer some amount in SBI PPF account from his own SBI saving account by 4:23 PM on 5th of November, will he earn the interest in that month?

Manish Chauhan

Yes

Akshay

I have a doubt…..don’t we get Interest on interest earned as well? What i mean is, in first example when I invest 60000 in lump sum, for the first month interest gained is 430 Rs…next time the interest should be calculated on 60430 and not 60000. Correct me if I am wrong

Manish Chauhan

Yes, it happens like that only ..

Rabi

There is a difference between compounding monthly or annually. In case of PPF, interest is calculated monthly and added annually. The case you are talking about is compounding monthly.

In most cases, it is compounded annually.

ashokgupta

Dear Sir,

Due to death a PPF A/c was closed. Bank refunded the total balance amount to nominee on 30th of April with interest up to March End only. The interest for the period 1st April to 30th April which is amounting to about Rs. 10,000.00 is not paid by Bank in spite of repeated requests. Kindly advice as to how can we get this unpaid amount form Bank and to whom should we approach for this.

Manish Chauhan

Hi ashokgupta

I suggest that you now take the RTI route. You can file the RTI and ask your queries to them. THey are bound to reply you on your queries.

Its a bit long cut, but works well

Manish