The rate of interest will be calculated on the lowest balance in the account between the close of the fifth day and the end of the month and will be credited to your account at the end of the year. So, to get the maximum out of your investment, deposit the amount in the first few days of the month.
PPF Interest is calculated every month and added to the balance at the end of the year. So the amount invested in April/May will earn more interest than money invested in February/March.
You have a balance of Rs 1,50,000 in your PPF account at the beginning of the month. Now you make an additional deposit of Rs 50,000 in the account on the 10th. As per the rules, when monthly interest calculation is undertaken, interest will be paid only on Rs 1,50,000 and not on the additional amount because one has to take the lower of the two amounts – Rs 1,50,000 and Rs 2,00,000 – for the purpose of calculation of interest.
How the interest calculation works?
Interest = [(A x 0.08) x M] / 12
Amount Invested = A
Month = M [April = 1…….Feb = 11 (1 to 11)]
Calculate this for each month and sum of all values gives you the Interest for that Particular Financial Year.
What should you do to maximise the interest you earn on PPF account?
1- Make deposits in your PPF account before or on the 5th of every month.
2- Ensure that you withdraw any funds only after the 31st or the last day of every month. So that you will get interest for that month.
3- Check your PPF account statements carefully to ensure that interest payments are properly credited into your account.