Get Maximum From PPF
Interest for a particular month is calculated on the lowest balance between the close of the fifth day and the end of the month. If you want to have this benefit you need to invest your monthly contribution within 5th of every month.
Suppose Mr.A and Mr.B opened PPF account on same day and started to contribute Rs.8,000 each month but Mr.A is contributing before 5th and Mr.B is contributing after 5th of each month then how much difference we can see.
Financial Planning–The First Steps
Mr.A’s Accumulation after 15 years.
- First Year Contribution Rs.8000 PM.
- 1st Month Contribution-8,000+688 (interest for 12 months)=8688
- 2nd month Contribution-8,000+631 (Interest for 11 months)=8631
- Like this at the end of 1st year Principal is (8000*12)+(4472)=1,00,472. The same amount will be his contribution for the remaining 14 years. So, at the end of the 15th year his accumulated amount is Rs.25,39,929.
Mr.B’s Accumulation after 15 years
- First Year Contribution Rs.8000 PM. (But after 5th of each month)
- 1st Month Contribution-8,000+630 (Interest for 11 Months)=8630
- 2nd Month Contribution-8,000+573 (Interest for 10 Months)=8,573
- Like this at the end of 1st year Principal is (8000*12)+ (3,784)=99,784. The same amount will be his contribution for the remaining 14 years. So, at the end of the 15th year his accumulated amount is Rs.25,22,536
- Difference of returns between Mr.A and Mr.B is-Rs.17,393.
- Just by paying PPF regularly before 5th of every month you get this Rs 17393 returns.