Those who invest in Public Provident Fund (PPF) account for the financial year 2024-25 should be keenly aware of why April 5 is an important date to optimise returns.

Meeting this deadline is crucial to make sure your interest earnings are as high as they can be. We’ll go into the what, why and how of PPF investments in this article.

The Importance of Timely Deposits

Under the PPF scheme, interest accrual is calculated based on the lowest balance between the fifth of each month and month-end. Hence, deposits made before April 5th ensure inclusion in this calculation, resulting in higher overall interest earnings.

For those opting for lump sum payments, missing this deadline means forfeiting a month’s worth of interest on the annual deposit—a costly oversight.

Consider the scenario of a PPF account holder making a deposit on April 15. According to PPF regulations, interest is calculated based on the balance preceding the deposit date, resulting in no interest earned for April. Conversely, deposits made on or before April 5 secure interest accrual for the entire month.

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Long-Term Returns and Deposit Deadlines

The significance of timely deposits becomes even more apparent when considering long-term returns. With interest rates reviewed quarterly by the government, maximising earnings requires adherence to deposit deadlines.

For example, assuming the current 7.1% interest rate per annum for the April-June 2024 quarter, an investor making timely annual deposits of ₹1.5 lakh could earn ₹18.18 lakh over 15 years.

In contrast, a late deposit after April 5 would yield only ₹15.84 lakh—a loss of ₹2.69 lakh over the investment period.

Even for investors opting for monthly contributions, deposit deadlines are critical. Monthly payments made before the fifth of each month ensure maximum interest accrual. Missing this deadline, though less detrimental than late lump sum payments, still results in reduced overall returns.

Tax Exemptions and Timely Deposits

It’s important to highlight that interest earned from PPF accounts is tax-exempt, further underscoring the importance of timely deposits. Failing to deposit before April 5 or before the fifth of any given month means missing out on valuable tax benefits while filing taxes the next year.

Investors should be vigilant about deposit deadlines to maximize their PPF earnings and capitalize on tax exemptions.

With a maximum annual investment limit of ₹1.5 lakh, strategic deposit planning is key to unlocking the full potential of PPF investments.

By understanding the significance of timely deposits and their impact on interest accrual, investors can make informed decisions to optimise their financial returns.

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