The Public Provident Fund, or PPF, is a government backed small-saving scheme. Though started in 1968 with the objective of providing social security during retirement to workers in the unorganized sector and for self-employed individuals, it has become a very popular tax-saving instrument.
It would make financial sense to invest the money in your PPF account at one go at the start of the financial year. Do note, the financial year starts from April 1 and ends on March 31. It starts today!
The reason being that while the interest is only added to the account at the end of the financial year, it is calculated on a monthly basis. The calculation is on the lowest balance between the fifth and the last day of the month. So if you deposit the entire amount that you wish to invest before April 5, you get the maximum gain.
You can do it online, if you have an online PPF account. If you need to visit the bank personally, please do so on Saturday. Banks are not open to the public today, and tomorrow is a public holiday. So make a trip to the bank on April 3, 2021.
If you cannot afford to put in the entire amount at one go or you struggle with cash flows, you can invest in instalments. If you make multiple deposits, ensure that you do them at the very start of the month.
- Interest rate is compounded annually.
- The return is guaranteed; you are assured of a fixed return.
- The actual return is flexible. This is because the interest rate is reset every quarter.
- Once upon a time, PPF returned an enticing (annual) 12% to gradually taper down to 7.1%. There are spurts - at one time it moved from 8% to 8.8%.
- Interest is calculated on a monthly basis, and paid on the lowest amount between the 5th and the last day of the month.
- Interest is credited to the account at the end of the financial year (March 31).
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