Consider the following extract from a newspaper article :

The interest on your PPF balance is compounded annually, but the calculation is done every month. The interest is calculated on the lowest balance between the fifth and last day of every month.

So, if you invest before the 5th, the contribution will earn interest for that month too. Otherwise, it's like an interest-free loan to the government for a month

Let's say that there is already Rs. 2,00,000 in my PPF account and I deposit Rs. 1,00,000 in my PPF account today (14th March 2015), will this deposit not earn any interest at all since I did not deposit it before 5th of the month?

1 Answer 1


Assuming you had Rs 2,00,000 before 1st April 2014, then the interest for the Month of March 2015 will only be on Rs 2,00,000. The interest for April 2015 will be for Rs 3,00,000

The lowest balance between 5th and month end is considered.

Interest is calculated monthly and compounded annually. i.e. if the Balance is Rs 2,00,000 from April to Sept, the interest is calculated every month on Rs 2,00,000 [Say Rs 1,500 every month is the interest]. If you deposit Rs 1,00,000 in Oct, then from Oct interest is calculated on Rs 3,00,000 till March [Say Rs 2250 per month]. On 31st March all the interest is added to Rs 3,00,000, i.e. 322500. For April the interest will be on this amount.

  • 1
    Does this mean that I will not get an interest of 8.75 % on 3,00,000 rs on 31st March 2015? I was informed by a CA that if I deposit by 20th March 2015, the year end interest for 2015 will be calculated on 3,00,000. Also, can you clarify what you mean by the interest for the month of March and April. I thought interest was compounded annually.
    – CKing
    Commented Mar 15, 2015 at 15:25

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