Tax Planning PPF interest calculationPPF deposit datePPF timingPPF rules 2025PPF April 5thPPF monthly interestPPF lump sum vs SIPPPF maturity calculationPublic Provident Fund

PPF Timing Strategy: The April 5th Rule That Saves You Rs 22,000

PPF interest is calculated on minimum balance between 5th and last day of month. Depositing Rs 1.5L on April 6 instead of April 5 costs Rs 22,000 over 15 years. Month-by-month interest math inside.

By HonestMoney.in Editorial Team | Updated April 25, 2025

Depositing Rs 1.5 Lakh in PPF on April 6 Instead of April 5 Costs You Rs 22,000 Over 15 Years. One Day. Rs 22,000. Here Is the Exact Math.

PPF at 7.1% is the best risk-free investment under Section 80C. Sovereign guarantee, EEE tax status, Rs 40+ lakh corpus in 15 years.

But most people get one thing wrong: when they deposit the money.

PPF interest is not calculated on your deposit date. It is calculated on the minimum balance between the 5th and the last day of each month. This means every rupee deposited after the 5th of a month earns zero interest for that entire month.

Deposit Rs 1.5 lakh on April 5? Full 12 months of interest. Deposit on April 6? Only 11 months of interest.

One day’s delay. Compounded over 15 years. Rs 18,000-22,000 gone.

How PPF Interest Actually Works

The rule

PPF interest is calculated on the lowest balance between the close of the 5th day and the end of the month, at the rate of 7.1% per annum, divided by 12.

What this means in practice

Deposit Date	Counts for Interest From	Months of Interest Earned (if deposited in April)
April 1	April	12 months
April 2	April	12 months
April 3	April	12 months
April 4	April	12 months
April 5	April	12 months
April 6	May	11 months
April 15	May	11 months
April 30	May	11 months
May 5	May	11 months
May 6	June	10 months

Any deposit between the 6th and end of the month earns the same interest — it all counts from the next month. There is no benefit to depositing on the 10th vs the 28th. Both start earning from the following month.

The 15-Year Cost of Wrong Timing

Scenario 1: Lump sum Rs 1.5L on April 5 every year

Total deposits over 15 years: Rs 22,50,000

Year	Opening Balance	Deposit (April 5)	Interest Earned	Closing Balance
1	0	1,50,000	10,650	1,60,650
2	1,60,650	1,50,000	22,055	3,32,705
3	3,32,705	1,50,000	34,272	5,16,977
5	—	—	—	9,19,614
10	—	—	—	22,09,388
15	—	—	—	Rs 40,68,209

Scenario 2: Lump sum Rs 1.5L on April 6 every year

Same deposits, one day later. Each year’s deposit misses April interest.

Lost interest per year on Rs 1.5L: Rs 1,50,000 × 7.1% ÷ 12 = Rs 888

Over 15 years, this Rs 888 annual loss compounds:

Year	Lost Interest (That Year)	Cumulative Lost Interest (Compounded)
1	Rs 888	Rs 888
5	Rs 888	Rs 5,256
10	Rs 888	Rs 12,744
15	Rs 888	Rs 22,147

Final corpus: Rs 40,46,062 — a gap of Rs 22,147 from just depositing one day late every year.

Lump Sum vs Monthly Deposits: The Rs 1.53 Lakh Difference

Many people deposit Rs 12,500/month instead of Rs 1.5L lump sum. This costs significantly more than the one-day timing error.

Monthly deposit (Rs 12,500 on the 1st of each month)

Month	Deposit	Months of Interest
April	Rs 12,500	12
May	Rs 12,500	11
June	Rs 12,500	10
July	Rs 12,500	9
August	Rs 12,500	8
September	Rs 12,500	7
October	Rs 12,500	6
November	Rs 12,500	5
December	Rs 12,500	4
January	Rs 12,500	3
February	Rs 12,500	2
March	Rs 12,500	1

Average months of interest: 6.5 months (instead of 12 for lump sum)

15-year comparison

Strategy	Total Invested	Corpus at 15 Years	Difference from Optimal
Lump sum on April 1-5	Rs 22,50,000	Rs 40,68,209	—
Lump sum on April 6	Rs 22,50,000	Rs 40,46,062	-Rs 22,147
Monthly Rs 12,500 (on 1st)	Rs 22,50,000	Rs 39,15,073	-Rs 1,53,136
Monthly Rs 12,500 (on 10th)	Rs 22,50,000	Rs 38,89,541	-Rs 1,78,668
Quarterly Rs 37,500 (on 1st)	Rs 22,50,000	Rs 39,78,921	-Rs 89,288

Lump sum on April 1-5 beats monthly deposits by Rs 1.53 lakh over 15 years. That is Rs 10,000+ per year in lost interest from choosing the wrong deposit frequency.

The Optimal PPF Strategy

If you can invest lump sum

Deposit Rs 1,50,000 on April 1 (or latest by April 5) every year
Set a calendar reminder for March 25: arrange funds so they are ready by April 1
Never split into monthly or quarterly deposits unless cash flow makes lump sum impossible

If you must invest monthly

Deposit by the 1st of every month — not the 5th, not the 10th
If the 1st is a holiday, deposit on the last working day of the previous month
Set up a standing instruction (SI) with your bank for the 1st of each month
Never deposit between the 6th and 30th — you gain nothing over depositing on the 1st of the next month

Withdrawal timing (reverse logic)

If you need to make a partial withdrawal from PPF:

Withdraw after the 5th of the month — this way, the higher pre-withdrawal balance earns interest for that month
Withdrawing on the 4th means the reduced balance is used for the month’s interest calculation

PPF Lock-in: It Is Actually 15+1 Years

The “15-year lock-in” is misleading.

PPF maturity is calculated from the end of the financial year in which you opened the account, not from the deposit date.

Account Opened	FY of Opening	15th FY Ends	Maturity Access From
April 5, 2010	2010-11	March 31, 2026	April 1, 2026
December 15, 2010	2010-11	March 31, 2026	April 1, 2026
March 30, 2011	2010-11	March 31, 2026	April 1, 2026
April 1, 2011	2011-12	March 31, 2027	April 1, 2027

Opening on April 1, 2011 vs March 30, 2011 — just 2 days apart — means maturity differs by a full year.

If you are opening a new PPF account, open it in March (before March 31) rather than April. You save one full year on the lock-in period while the deposit still earns interest from the same financial year.

Why PPF Rate Should Be Higher Than 7.1%

PPF interest rate is supposed to be linked to the 10-year government security (G-sec) yield with a 25 basis point markdown, as recommended by the Shyamala Gopinath committee in 2011.

Period	10Y G-sec Yield	Formula-Based PPF Rate	Actual PPF Rate	Shortfall
Q1 FY 2024-25	7.10%	6.85%	7.1%	+0.25% (PPF higher)
Q3 FY 2024-25	7.25%	7.00%	7.1%	+0.10%
Q1 FY 2025-26	7.40%	7.15%	7.1%	-0.05%

The rate has been frozen at 7.1% since April 2020 despite G-sec yields fluctuating. When yields were low (2020-2021), PPF rate was generous. Now that yields have risen, the rate should be 7.15-7.5% but remains at 7.1%.

You are currently being short-changed by approximately 5-40 basis points. Over 15 years on a Rs 22.5L total investment, this costs Rs 15,000-60,000 depending on future rate adjustments.

This is a political decision, not a market-driven one. The government has no obligation to follow the formula.

ELSS vs PPF vs FD vs NPS: Which Tax-Saving Option Wins? — PPF compared with every other 80C option
Your 80C Is Already Half-Used by EPF — check how much of your Rs 1.5L is actually available for PPF
Debt Mutual Funds Are Dead — Alternatives — PPF as the best risk-free alternative to debt MFs

HonestMoney.in Editorial Team

Research-backed content sourced from official publications, regulatory filings, verified data, and real-world experiences. Updated April 2025.

FAQ 8

Frequently Asked Questions

Research-backed answers from verified data and published sources.

How is PPF interest calculated every month?

PPF interest is calculated on the minimum balance between the 5th and the last day of each month. If your balance is Rs 5 lakh on April 5 and you deposit Rs 1 lakh on April 10, the interest for April is calculated on Rs 5 lakh — not Rs 6 lakh. The deposit on the 10th only counts from May. Interest is calculated monthly but credited to the account at the end of the financial year (March 31). The current rate is 7.1% per annum, divided by 12 for monthly calculation.

What is the best date to deposit money in PPF?

April 1 to April 5. Ideally, deposit your full Rs 1.5 lakh as a lump sum on or before April 5 of each financial year. This ensures the entire amount earns interest for all 12 months. If you deposit on April 6 or later, you lose April's interest on that deposit. Over 15 years, this one-month loss on a Rs 1.5L annual deposit compounds to Rs 18,000-22,000 in lost interest. If lump sum is not possible, deposit by the 5th of every month.

Is lump sum deposit better than monthly SIP in PPF?

Yes, significantly. A lump sum of Rs 1.5L deposited on April 1 earns interest for 12 full months. Monthly deposits of Rs 12,500 (Rs 1.5L divided by 12) mean each instalment earns interest for fewer months — April deposit earns 12 months, May deposit earns 11, and so on. The difference over 15 years at 7.1%: lump sum produces Rs 40.68L vs monthly deposits producing Rs 39.15L — a gap of approximately Rs 1.53L. If you have the cash flow, always go lump sum on April 1-5.

What happens if I deposit PPF on a weekend or bank holiday?

If April 5 falls on a weekend or holiday, deposit on the last working day before April 5. The 5th is the cutoff date regardless of whether the bank is open. If you deposit on the next working day after the 5th (say April 7 because April 5-6 was a weekend), you still lose that month's interest. Online banking and net banking transfers typically process on the same day if done before the bank's cutoff time, even on the 5th.

Does this timing rule apply to PPF loan and withdrawal too?

The timing rule applies to deposits only. Withdrawals reduce the balance on the date of withdrawal, affecting interest calculation for the remaining months. If you withdraw on the 4th of a month, the reduced balance is used for that month's interest. If you withdraw on the 6th, the original higher balance earns interest for that month. For partial withdrawals, timing matters in reverse — withdraw after the 5th of the month to get one extra month of interest on the withdrawn amount.

How long is the PPF lock-in actually?

The PPF lock-in is 15 financial years from the end of the year in which you opened the account. If you opened PPF on April 5, 2011 (FY 2011-12), the 15-year period ends on March 31, 2027. The maturity amount is available in FY 2027-28 — starting April 1, 2027. So the effective lock-in is 15 years plus the remainder of the opening financial year. If you opened on March 30, 2012, the lock-in is nearly 16 calendar years (March 2012 to April 2028).

Can I extend PPF beyond 15 years?

Yes. After 15 years, you can extend in blocks of 5 years — with or without fresh contributions. Extension with contributions: you continue depositing up to Rs 1.5L/year and earn interest on the full balance. Extension without contributions: no new deposits, but the existing balance earns interest at the prevailing rate. You must submit Form H within 1 year of maturity to extend with contributions. If you miss this window, you can only extend without contributions. There is no limit on the number of 5-year extensions.

When can I make partial withdrawals from PPF?

Partial withdrawal is allowed from the 7th financial year onward. The maximum withdrawal is 50% of the balance at the end of the 4th preceding year OR the balance at the end of the preceding year, whichever is lower. Only one withdrawal per financial year is allowed. Example: if your balance at end of year 4 was Rs 8 lakh and at end of year 6 was Rs 14 lakh, your maximum withdrawal in year 7 is 50% of Rs 8 lakh = Rs 4 lakh. You must submit Form C to the bank or post office.

Disclaimer: This information is for educational purposes only and does not constitute tax advice. Tax laws change frequently. Consult a qualified Chartered Accountant or tax professional before making tax-related decisions. Always verify with the latest Income Tax Act provisions and official government notifications.