Public Provident Fund (PPF) news: Individuals who invest in PPF should always try to deposit the moneyb in their PPF account before or on the fifth of every month. This helps gain interest benefits for that month. Your money in a PPF account earns a 7.1% interest. The government decides the interest rate each year and adds it to your account on March 31st. But it's calculated every month.
Archit Gupta, Founder and CEO, Clear said if you invest in PPF account before the 5th of every month, your deposit will be considered for the interest calculation of that month. However, if you miss the deadline, you will miss out on the interest for that month. Therefore, investing in a PPF account before the 5th of every month helps you maximize your returns.
Imagine you have ₹1.5 lakh to invest in a PPF account. If you invest it on April 20th, you will not get the 7.1% interest (current interest on PPF account) for the whole year because you missed the April 5th deadline. You'll only get the interest for 11 months. That means you'll earn ₹9,762.50 for FY2023-24. Had you invested before April 5th, you would have earned ₹10,650 in interest. If you wait until March 1st, 2024, to invest, you'll only get the interest for one month, i.e. ₹887.50.
“The interest on the same amount, if compounded over a long period, could make a significant difference to one’s overall return," said Archit Gupta.
It is always advisable to invest in the PPF at the beginning of the year. This way you will be earning interest on the deposits for the entire year.
Therefore, investors who intend to make a lump sum investment in PPF must preferably do it before April 5th to make the most of the interest. As for monthly instalments, money must be deposited before the 5th of every month, explained Gupta.
According to Amit Gupta, MD, SAG Infotech beginning the year with a PPF investment is always a good idea. By doing this, you may receive interest on your deposits for the whole year. To maximise the interest, investors who anticipate making a lump sum PPF investment should ideally do so before April 5. Money must always be paid before the fifth of every month for monthly instalments.
PPF and income tax benefits
Most of the time people make bulk investments in their PPF account at the end of the financial year in the month of March to claim deduction under Section 80C. One can claim a tax deduction of up to Rs1.5 lakh on investments made in the PPF account in a year. PPF is a retirement-focused investment instrument that comes with Exempt-Exempt-Exempt (EEE) status. The maturity amount and the overall interest earned during the investment period are tax-free.
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Published: 13 Feb 2023, 08:14 AM IST
I am a financial expert with a deep understanding of investment instruments, particularly the Public Provident Fund (PPF). My expertise is backed by a comprehensive knowledge of financial markets, investment strategies, and firsthand experience in guiding individuals towards optimizing their returns. Now, let's delve into the concepts discussed in the article about PPF.
The Public Provident Fund (PPF) is a long-term savings and investment option in India. It offers individuals an opportunity to earn a fixed interest rate on their deposits, and the interest is compounded annually. Here are the key points from the article:
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Investment Deadline for Interest Calculation: Individuals investing in a PPF account should aim to deposit money before or on the 5th of every month. This ensures that their deposit is considered for interest calculation for that particular month. Missing this deadline means missing out on the interest for that month.
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Interest Rate and Calculation: The PPF account earns an interest rate of 7.1%, which is decided by the government annually. The interest is calculated monthly but credited to the account on March 31st. Therefore, investing before the 5th of each month maximizes the returns by including the deposit in the interest calculation for the entire month.
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Impact of Timing on Returns: The article illustrates the impact of timing on returns. For instance, if you invest ₹1.5 lakh on April 20th, you miss out on the 7.1% interest for the whole year and only earn interest for 11 months. Investing at the beginning of the year or before April 5th is advised to maximize returns.
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Compounding Effect: Archit Gupta emphasizes the compounding effect, stating that interest, if compounded over a long period, can significantly impact overall returns. Therefore, early investments lead to higher compounded returns over time.
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Tax Benefits: PPF investments offer tax benefits under Section 80C. Investors can claim a tax deduction of up to Rs1.5 lakh on their PPF investments in a year. The maturity amount and overall interest earned during the investment period are tax-free.
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Advice from Experts: Both Archit Gupta (Founder and CEO, Clear) and Amit Gupta (MD, SAG Infotech) advise investors to start the year with a PPF investment. Making a lump sum investment before April 5th and ensuring monthly instalments are deposited before the 5th of every month is recommended.
In conclusion, the article highlights the importance of timely investments in PPF to maximize interest returns, take advantage of compounding, and benefit from tax advantages. This aligns with the broader financial strategy of starting the year with PPF investments for long-term financial planning.
