Thursday, June 13, 2024

Public Provident Fund (PPF) Investment and the Importance of the 5th Date

Investing in a Public Provident Fund (PPF) to save income tax requires a keen memory for the 5th date. This specific date alters the entire calculation of your PPF investment. If you deposit money into your PPF account on the 6th instead of the 5th, your potential returns diminish. Every individual investing in a PPF account must remember the significance of the 5th date. Opting for investment in the Public Provident Fund is an excellent choice for saving money for the future and availing tax benefits under Section 80C of the Income Tax Act. PPF offers guaranteed returns along with tax savings.

Understanding the calculations behind the interest accrued on a PPF investment is crucial. Remembering the importance of the 5th date significantly impacts the interest you receive. Investing in a PPF account yields an annual interest of 7.1%. Despite alterations in interest rates for various savings schemes at the start of the fiscal year, the government has maintained the interest rates for PPF unchanged.

Interest calculation on a PPF account is based on a monthly basis. However, this interest is credited to your account at the end of every fiscal year.

The 5th date plays a crucial role in calculating the interest on a PPF account. Depositing money into the PPF account before the 5th of every month earns you interest for that month, while deposits made between the 30th or 31st accrue interest based on the lowest balance.

By investing in a PPF account before or on the 5th of each month, you receive higher interest. For instance, depositing ₹1.5 lakh into your PPF account on April 5th yields an interest of ₹10,650 for the current fiscal year at an interest rate of 7.1%.

However, if you deposit the same amount after April 6th, you’ll receive interest only for 11 months of the fiscal year, amounting to ₹9,763. A mere day’s delay results in a loss of ₹887.

To earn maximum interest on your PPF, it’s advisable to deposit the entire amount at the beginning of the fiscal year. Investing ₹1.5 lakh before or on April 5th under Section 80C of the Income Tax Act allows you to earn interest on the entire sum. Depositing money monthly might reduce your overall interest at the end of the fiscal year.


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