What is the 5th fund in PPF? 5th date plays an important role in investing in PPF. The question is, what would happen in this account (How to invest in PPF) on the 5th, that it is necessary for every PPF account holder to understand its fund (When to invest in PPF)? Let us know.
PPF Deposit on 5th of every month: Public Provident Fund i.e. PPF is a great option for investment while saving money for the future. In this you will get guaranteed returns and good interest from banks. However, whenever it comes to PPF, it is very important to understand the interest calculation on PPF. 5th date plays an important role in investing in PPF. The question is, what would happen in this account (How to invest in PPF) on the 5th, that it is necessary for every PPF account holder to understand its fund (When to invest in PPF)? Let us know.
How much interest is available in PPF?
By investing in PPF account, you will get interest at the rate of 7.1 percent. The rates of many small savings schemes have changed since the beginning of this financial year i.e. the month of April, but the government has not made any change in the interest rates of PPF. The government assesses the interest paid on small savings schemes and PPF every quarter and makes changes in it as per the need.
Now understand the fund of 5th date in PPF
Interest rates on PPF are calculated on a monthly basis. However, this interest is credited to the account at the end of the financial year. The 5th date plays an important role in calculating how much interest will be received on PPF. Interest is paid on the lowest balance of the PPF account between the 5th and the last date (30th or 31st) of every month. This is the reason why you should invest in PPF on or before the 5th, so that you will get more interest.
Understand this with an example
Let us assume that you deposited Rs 1.5 lakh in PPF on or before April 5. In such a situation, at the rate of 7.1 percent, you will get a total interest of Rs 10,650 for the current financial year. Whereas if you deposit this money on or after April 6, you will get interest only for 11 months of this financial year. That means in this situation you will get interest of Rs 9,763. Meaning, in such a situation you will get less interest of Rs 887.
Should you invest once or every month?
If you want to earn more interest on PPF, it would be better if you deposit the entire amount at once at the beginning of the financial year. This is because if you invest Rs 1.5 lakh for the whole year on or before April 5, you will get interest on the entire money. Whereas if you deposit money in installments every month then the interest received will be reduced. So if you have money available then it will be beneficial to invest in one go, whereas if you do not have much money then you can choose the method of investing every month.