3 days ago
PPF: April Lump Sum Versus Monthly Investing Over 15 Years
Imagine putting ₹1.5 lakh into a PPF account every year.
You can add it all at the beginning of April or add ₹12,500 each month.
The PPF interest rate is currently 7.1%, but the government can review it.
Interest is worked out each month using the balance held after the fifth day.
If all the money is deposited by 5 April, the full amount can earn interest for that year.
With monthly deposits, some money arrives later and earns interest for fewer months.
Over 15 years, you invest the same total amount of ₹22.5 lakh in either method.
The early lump-sum method can produce a larger final corpus, while monthly investing may be easier for people using their salaries.
The PPF currently offers a 7.1% annual interest rate, compounded annually, though the government reviews the rate periodically.
PPF interest is calculated monthly using the lowest balance between the close of the fifth day and the end of the month.
Investing the full ₹1.5 lakh by 5 April allows the entire annual contribution to earn interest for the year.
With monthly contributions of ₹12,500, deposits made later receive interest for fewer months.
Both approaches invest ₹22.5 lakh over 15 years, but the April lump sum generally benefits from longer investment time.
- Who
- PPF investors contributing ₹1.5 lakh annually.
- What
- A comparison of investing the annual PPF contribution as an April lump sum or in monthly instalments.
- Where
- In a Public Provident Fund account.
- When
- Over a 15-year investment period; the article focuses on deposits by 5 April and monthly contributions.
- Why
- Because the timing of deposits affects how long the money remains invested and earns interest.
April Lump Sum
Monthly Instalments
Interest-earning period
April Lump Sum
Depositing the full ₹1.5 lakh by 5 April allows the entire contribution to earn interest for the year.
Monthly Instalments
Monthly deposits made later in the year earn interest for fewer months.
Final corpus
April Lump Sum
If the full annual amount is already available, investing early can lead to a higher final corpus because the money remains invested longer.
Monthly Instalments
The same total amount is invested, but the final corpus may be lower because some instalments are invested later.
Practical affordability
April Lump Sum
A lump sum is suitable for investors who already have the full annual contribution available.
Monthly Instalments
Monthly investing can suit people who plan their PPF contributions from their monthly salary.
Key facts
- Current PPF interest rate
- 7.1% annually
- Interest compounding
- Annual
- Interest calculation
- Monthly, based on the lowest balance between the close of the fifth day and the end of the month
- Annual contribution compared
- ₹1.5 lakh
- Monthly contribution compared
- ₹12,500
- Investment period
- 15 years
- Total invested under either method
- ₹22.5 lakh
Sources
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