Depositing money in one’s PPF account before the fifth of every month is a very wise advice as according to PPF rules, the interest on PPF deposits is calculated on the minimum balance between the fifth of the month and at the end of the month.

Please note, interest on PPF deposits is calculated monthly but it is credited only at the end of the financial year.

Therefore, if you are planning to invest a lump sum in your PPF account, financial planners recommend that you do it before April 5, in order to get the maximum amount of interest for your deposits.

Let’s take an example for better understanding. If you invest a lump sum of Rs 1.5 lakh in your PPF account before April 5 and it garners 8% per annum for the quarter between April and June 2019, then the interest to be calculated for the month of the April will be calculated on the minimum balance between April 5 and April 30. As you have deposited Rs 1.5 lakh before April 5 and as no other deposit can be made during the year, interest will be calculated as:

Rs 1,50,000 (lump sum investment amount) * 8% (interest rate) )/12 = Rs 1,000

The amount is divided by 12 because interest is calculated on a monthly basis. Therefore, interest that will be due in your PPF account for the month of April will be Rs 1,000. The same amount of interest will be due for the month of May and June as well as the interest rate normally remains the same for one quarter of the year.

However, if you were to make the payment after April 5, then you would lose out on the interest for the month of April. While it seems like a small amount, please do remember that PPF is a long-term investment and the power of compounding makes all the difference in such a case.