How to Get Maximum Interest in PPF? [EXPLAINED]

One of the commonly asked questions is how to get maximum interest in PPF (Public provident fund) and on which date we should deposit in PPF account to get maximum interest.

PPF or Public Provident Fund is one of the government backed saving schemes that you can open in any nationalized bank or post office. PPF has a lock-in period of 15 years and the deposits you make in PPF earn you monthly interest and yearly compounding.

The best way to earn maximum interest in PPF is to deposit maximum amount of Rs. 1.5 Lacs in the month of April between 1st to 5th day. This means if you deposit Rs. 1.5 Lacs before or on 5th day of April (start of financial year), you’ll get maximum interest in PPF from April month onwards throughout the financial year.

Another best way to get better interest in PPF if you do not want to invest the lump sum amount, is to deposit any amount on or before 5th day of any month, to at least get the interest on your deposits from that month onwards. If you miss the 5th day, you’ll start getting interest on your deposit from next month onwards.

Note: You’ll find the excel calculator to calculate PPF interest at the bottom of this article.

Maximum Interest in PPF using Excel Video

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Features of PPF

• PPF or Public Provident Fund is a savings scheme offered by the Government of India
• PPF has a lock-in period of 15 years
• Minimum deposit amount in a FY to keep your PPF account active is Rs. 500
• Maximum deposit amount for which you can earn interest in PPF account is Rs. 1,50,000
• The interest on the account is paid by the government of India and is set every quarter. PPF Interest amount is also tax-free
• PPF interest is calculated every month and is compounded annually
• The applicable PPF interest rate for October to December 2024, has been fixed at 7.1% annually
• PPF or Public Provident Fund falls under EEE category (Exempt, Exempt, Exempt), which means, the Deposits, Interest and Maturity Amounts are all exempted from Income Tax
• Partial withdrawals are allowed in PPF account
• Loan facility is also available in PPF account

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How Compounding Works in PPF

• Interest amount in PPF is calculated every month and is compounded annually
• Annual interest of let’s say 7.1% is divided by 12 to get monthly interest rate, which is then used to calculate monthly interest on PPF balance
• In this way, interest from April to March of next financial year are summed up and added to your balance on 31st March. This way you get annual compounding in PPF
• Compounding means getting interest on interest money
• The interest money you get on 31st March of every year will earn you more interest money in future years
• Important: While calculating interest on every month, if you deposit before or on 5th day of the month, you’ll get interest on this deposit from this month itself, else you will get interest on this deposit from next month onwards

ALSO READ: Rs. 1000 PPF Interest Calculation for 15 Years

Opening a PPF Account

• PPF accounts can be opened in post office, nationalized banks and major private banks such as ICICI and Axis. 
• In several banks like ICICI and Axis, you can open a PPF account online through net banking as well. 
• In case you are NRI (Non-resident of India), you cannot open a PPF account, but if you already had a PPF account before your became NRI, you can continue to hold PPF account until it’s maturity period
• Once the account is opened, a PPF passbook similar to the bank passbook is issued. 
• All transactions such as subscription, interest, withdrawals, etc. are recorded in this passbook. 
• Some banks simply allow PPF entries or PPF balance to be viewed online instead of issuing a passbook.
• You should remember that your amounts will be locked-in for 15 years in a PPF Account
• You can only have one PPF account at a time. Multiple PPF accounts for same holder are not allowed

PPF Interest Calculation Video for next 30 years

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Contributions that you can make in PPF

• Minimum contributions you should make in a PPF Account to keep the Account active is Rs. 500 in a Financial year.
• The maximum amount you can contribute to earn Tax-free interest in a Financial Year is Rs. 1.5 Lacs.
• You can make any number of deposit transactions in PPF in a Financial Year
• The contributions made towards PPF Account also help you in Saving your Income Tax, by claiming the Investments under Section 80C.
• You can check PPF balance online anytime

ALSO READ: Rs. 10000 FD Interest Calculation

PPF Interest Calculation for maximum interest

• We have already seen how monthly interest is calculated in PPF here
• PPF interest is calculated on monthly basis and is compounded yearly
• If you deposit before or on 5th day of the month, you’ll start getting interest from that month onwards
• If you deposit after 5th day of month, you’ll start getting interest on this deposit from next month onwards
• Below screenshot shows interest of Rs. 81,977.39 when a deposit of Rs. 12,500 is made before 5th day of April with the balance as shown

• Below is the screenshot for same deposit of Rs. 12,500 after 5th day of April, the interest you get is Rs. 81,903.44. There is no change in the interest for the month of May
• This proves that if we deposit before or on 5th day of the month, we’ll start getting interest from that month onwards for the deposit

• One thing is clear about getting more interest is – to deposit on or before 5th day of the month
• Another secret to maximize the interest in PPF is to deposit maximum amount of Rs. 1.5 Lacs in the month of April before or on 5th day
• In this way, you’ll start getting maximum allowed interest from April month to March month of next year
• Below are the screenshots for deposits of Rs. 1.5 Lacs in April and same amount being divided throughout 12 months (April to March)

As seen above, PPF Interest = Rs. 10,650 when we deposit maximum of Rs. 1.5 Lacs before 5th day of April in FY and PPF Interest = Rs. 5,768 when we deposit Rs. 12,500 every month before 5th day of the month.

So try to deposit maximum amount in PPF before or on 5th April to get maximum interest in your PPF account.

ALSO READ: How to Save Tax on Salary above Rs. 5 Lakh

PPF Tax Benefits

• PPF falls under EEE Category – Principal, Interest and maturity amounts are exempted from income tax
• The deposits you make in PPF can be used to claim deductions under section 80C (maximum Rs. 1.5 Lacs) in order to save income tax
• Income Tax can be saved only if you choose Old Tax Regime to calculate income tax
• Also, the interest amount you receive every year is also exempted from income tax. Which means, you need not have to pay any tax on the interest you receive every year on 31st March
• And the maturity amount you’ll receive after PPF maturity will be exempted from income tax.
• So you pay no income tax at all on the interest amounts, and on top of it, you save income tax by depositing in PPF account! Double benefits!

How to Save Income Tax Video

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How to open a PPF Account?

• PPF accounts can be opened in post office, nationalized banks and major private banks such as ICICI, HDFC and Axis
• In several banks like ICICI and Axis, you can open a PPF account online through net banking as well. 
• In case you are NRI (Non-resident of India), you cannot open a PPF account, but if you already had a PPF account before you became NRI, you can continue to hold PPF account until it’s maturity period
• Once the account is opened, a PPF passbook similar to the bank passbook is issued. 
• All transactions such as subscription, interest, withdrawals, etc. are recorded in this passbook. 
• Some banks simply allow PPF entries or PPF balance to be viewed online instead of issuing a passbook.
• You should remember that your amounts will be locked-in for 15 years in a PPF Account
• You can only have one PPF account at a time. Multiple PPF accounts for same holder are not allowed

Standing Instructions on PPF Account

• In order to deposit in PPF account on regular basis, you can set standing instruction for regular deposits in PPF
• This feature is available in almost all banks wherever you open a PPF account
• Setting standing instructions will help you to be disciplined towards saving, much like SIPs

ALSO READ: SIP Returns Excel Calculator

Maturity options in PPF

• At the end of the lock-in period of 15 Years, you have following three options:
• You can withdraw the PPF amount along with the interest earned. The entire maturity proceeds are exempt from tax.
• You can extend the life of the PPF account indefinitely in blocks of 5 years at a time with contribution. You have to submit a request to extend the account, with further contributions by submitting Form H. The choice of extension with contribution has to be made within one year from the date of maturity, otherwise the default choice of extension without further contribution applies.
• Extension of PPF without further contribution. You do not need to fill any form to choose this option.

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Conclusion

So PPF or Public Provident Fund account is a great way to save for long term and save income tax at the same time.

You get maximum interest in PPF when you deposit maximum amount of Rs. 1.5 Lakh in the month of April before 5th day. This will help you to generate maximum interest amounts in all months throughout the year.

Some more Reading:

• Income Tax Calculator 2023-24 Excel Download
• Standard Deduction in New Tax Regime Explained
• PF Withdrawal Process Online
• Compounding in Stock Market

Frequently Asked Questions (FAQs)

Can I maintain more than 1 Public Provident Fund (PPF) account under my name?

Only one PPF account can be maintained by an Individual, except an account that is opened on behalf of a minor.

What happens if I fail to deposit any amount in one or more Financial Years in PPF account?

A penalty of Rs. 50 will be levied per year of default, if the customer doesn’t deposit the minimum deposit amount of Rs. 500 on the completion of the financial year.

Can I avail of Loan facility on my Public Provident Fund (PPF) investment?

Customers can avail of the loan facility between third financial year to sixth financial year ie. from third financial year up to end of fifth financial year in a PPF Account.

When does a Public Provident Fund (PPF) account mature?

A Public Provident Fund (PPF) account gets matured after the completion of 15 years from the end of the year in which the account was opened.

Can I extend the tenure of a Public Provident Fund (PPF) investment beyond the Maturity Period?

A customer can extend the tenure of a Public Provident Fund (PPF) investment for a block period of 5 years beyond the maturity period by submitting Form H within one year from the date of maturity.

Can I withdraw funds from my Public Provident Fund (PPF) Account?

Customer can make one withdrawal every year, from the 7th financial year, of an amount that does not exceed 50% of the balance of the customer credit at the end of the fourth year immediately preceding the year of withdrawal or the amount at the end of the preceding year, whichever is lower.

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