📌 What Makes This “Extra Month Interest” Trick Work?

The Public Provident Fund (PPF), a popular long‑term savings and tax‑saving plan in India, calculates interest in a specific way that most investors overlook:

📍 Interest Calculation Rule

  • Interest is calculated monthly, but only on the lowest balance maintained between the 5th and the last day of each month.
  • Interest is credited once a year (on march 31).

This rule creates an opportunity to increase how much interest your money earns — simply depending on when it is credited into your PPF account.

📅 The Trick: Deposit on or Before the 5th of the Month

If your PPF contribution is credited on or before the 5th day of the month, then:

✔ That contribution earns interest for the entire month.
✔ If it is credited after the 5th, that month’s interest for that deposit is lost (interest starts only the next month).
So by consistently depositing on or before the 5th of each month — or ideally at the start of the financial year — you make sure your money earns interest for all 12 months instead of effectively just 11.

👉 In effect, you earn what feels like one additional month’s interest each year on that deposit. Over many years — especially through compound interest — this can add up to significant extra returns without any change in how much you invest.

📌 How to Use the Strategy

🗓️ 1. Lump‑Sum Annual Investment

  • If you plan a one‑time yearly contribution (up to the maximum ₹1.5 lakh allowed per financial year), make that deposit on or before April 5.
  • This way, the entire amount earns interest for the full 12 months of the financial year — maximizing the return on your contribution.

✅ Example: depositing the full ₹1.5 lakh before April 5 gives interest on that amount for the entire year. But if you deposit after April 5 (say April 15), you effectively lose interest for April.

📆 2. Monthly Investments

  • If you prefer to contribute monthly, deposit each month’s installment on or before the 5th.
  • That way, every monthly contribution earns interest from the very month it is deposited instead of starting later.

📌 Pro tip: Depositing on the 1st of the month gives a better buffer in case banking delays push credits past the 5th.

💡 Why This Works (and Why It Matters)

🔹 PPF pays interest tax‑free, and the rate is usually higher than many fixed income options — currently around 7.1% per annum.
🔹 Because interest compounds annually, earning extra interest for one additional month each year — even on a small portion of your balance — can grow your final corpus noticeably over decades.

This trick doesn’t change the rules of PPF — it simply exploits the way interest is calculated to make your savings work slightly harder for you.

🧠 Summary: How to Earn the “Extra Month”

Strategy

What You Do

Effect

Lump‑sum deposit

Invest full annual limit on or before April 5

Interest on total amount for full 12 months

Monthly contributions

Deposit each installment on or before the 5th

Each monthly contribution earns interest from that month

Result: More interest earned over the long term without investing more money — just better timing.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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Balasahana Suresh

04/02/2026 11:40 AM