The “5th date rule” isn’t just a suggestion — it’s a timing guideline linked directly to how interest on your PPF deposits is calculated. Knowing this rule can help you earn the maximum possible interest on your investment.
1. How PPF Interest Is Calculated
Interest on PPF accounts isn’t calculated from the day you deposit money. Instead:
- Interest is calculated every month on the minimum balance in your account between the 5th day of the month and the last day of that month.
- The interest for all 12 months is then credited at once at the end of the financial year (March 31).
💡 This means that only the balance that exists on or before the 5th earns interest for that month. If you deposit money on the 6th or later, that additional amount won’t be considered for interest in that month — it starts earning interest only from next month.
2. Why the 5th of Every Month Matters
There are two important variations of the rule:
🔹 Monthly Deposits
If you deposit monthly into your PPF account:
- Make your contribution on or before the 5th of each month so that it earns interest for that entire month.
- Deposits made after the 5th will start earning interest only in the next month.
🔹 Lump‑Sum Annual Deposit
If you plan to deposit a lump sum (e.g., ₹1.5 lakh maximum) each financial year:
- The best time to deposit is **on or before April 5 (i.e., within the first 5 days of the new financial year).
- If you invest by this date, the full amount earns interest for all 12 months of the year.
- If you delay this deposit to, say, 10th or later, you lose one month’s interest on your PPF investment for that year.
3. What Happens if You Miss the 5th?
If your deposit is made after the 5th:
- That deposit will not be counted for interest in that month — even if it’s just one day late.
- You’ll only earn interest on the lower balance between the 5th and the month end.
Over time, especially considering the long 15‑year (or more) horizon of a PPF account, even losing one month’s interest every year can significantly reduce your final maturity amount.
4. Example: How It Works
Let’s say you plan to invest ₹1.5 lakh for the financial year:
✅ If deposited on April 3:
You get interest on ₹1.5 lakh for all 12 months.
❌ If deposited on April 7:
Only the balance before April 5 is counted for interest — in this case, zero — so you start earning interest from May onward.
Over 15 years, this timing difference can result in significantly lower returns due to lost interest and compounding.
5. Long‑Term Advantage of the 5th Rule
Even though the difference in interest from missing the 5th might seem small month to month, in a long‑term scheme like PPF (with a 15‑year lock‑in and compounding), that small difference can add up to a substantial amount by maturity.
Quick Takeaways
✔ PPF interest is based on the minimum balance between the 5th and month‑end.
✔ Depositing on or before the 5th ensures you earn interest for that month.
✔ For annual deposits, April 5 is the key deadline to get interest for the full financial year.
✔ Delaying deposits beyond the 5th means missing interest for that month.
Final Thought
The PPF 5th date rule is essential if you want maximum interest on your investment — especially since the PPF is designed for long‑term growth and compounding. Depositing on time may seem like a small step, but it can have a big impact on your final retirement corpus.
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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