PPF Interest Calculation: The 5th-of-Month Rule Explained
PPF interest for a month is calculated on the lowest balance in your account between the close of the 5th day and the last day of that month. Deposit on or before the 5th and your money earns interest from that month; deposit on the 6th or later and you lose that whole month's interest on the amount, even if you deposited a day late.
PPF interest for any given month is worked out on the lowest balance your account held between the close of the 5th day and the last day of that month. If you deposit on or before the 5th, the new amount counts towards that month's interest calculation. If you deposit on the 6th or any later date, the deposit is simply not part of the balance used for that month, so you lose an entire month of interest on it, not just a few days.
Why the 5th of the month matters so much
Public Provident Fund accounts earn interest that is calculated monthly on the lowest balance between the 5th and the end of the month, then credited to the account once a year. This rule, set out in the Public Provident Fund Scheme rules (the scheme text is on the National Savings Institute site), rewards depositing early in the month and does not reward at all a deposit made even one day after the 5th, since the balance check happens right after that date. A deposit on the 6th earns nothing extra for that month; it only starts counting from the 5th of the following month.
This is different from how many people assume savings interest works, where a deposit usually starts earning from the day it lands. PPF's monthly-lowest-balance rule means the specific date inside the month matters far more than how many days are left before month-end.
See exactly how much interest a given deposit schedule earns over 15 years with the PPF calculator. It shows the year-by-year balance and lets you compare depositing early each month against depositing late.
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A worked example
Assume an existing PPF balance of Rs 1,00,000 at the start of a month, an interest rate of 7.1% per annum (7.1% divided by 12 for a monthly rate, applied to the lowest balance), and a fresh deposit of Rs 12,500 that same month.
| Scenario | Balance used for that month's interest | Approx. interest for that month |
|---|---|---|
| Deposit made on the 3rd (before the 5th) | Rs 1,12,500 (opening balance + deposit) | About Rs 665 |
| Deposit made on the 10th (after the 5th) | Rs 1,00,000 (opening balance only) | About Rs 592 |
The gap here, about Rs 74 for a single month on a Rs 12,500 deposit, looks small, but it repeats every month you deposit late, every year, for up to 15 years. If you put in Rs 12,500 every month (Rs 1.5 lakh a year) and always deposit after the 5th, each instalment loses one month, so you give up about Rs 890 of interest in that year at 7.1%, and the missing amount also stops compounding in later years. That is purely from timing, without changing how much you invest.
How to use this rule with different deposit habits
- Lump sum once a year: deposit the full amount on or before 5 April, the start of the financial year, so it earns interest for the maximum number of months that year.
- Monthly instalments: set a standing instruction or reminder for the 1st to 4th of each month rather than the last week, so each instalment counts from that same month.
- Irregular deposits: whenever you do deposit, try to do it in the first five days of the month rather than the last few days, even if the exact date varies.
Why banks and post offices show interest only once a year
Even though the balance is checked every single month, PPF does not pay out interest monthly. Instead, the scheme adds up the interest worked out for each of the twelve months and credits the total to your account at the end of the financial year, usually as one entry in your passbook or statement dated 31 March. This is why a PPF passbook can look unchanged for months and then show a single, larger interest entry once a year, which sometimes confuses account holders who expect to see interest added every month like a savings account.
Other PPF rules that affect your calculation
You must deposit at least Rs 500 in a financial year to keep the account active, and total deposits in a year cannot exceed Rs 1.5 lakh across your own and any minor's account you operate, per the PPF scheme rules. The interest rate itself is set by the government every quarter and is not fixed for the full 15-year tenure, so a calculation done today using 7.1% may need revising if the rate changes in a later quarter. The rate for October to December 2026 is announced near the end of September, so always check the current quarter's rate on the National Savings Institute site or your bank or post office before relying on a long-term projection.
If you extend your PPF account after 15 years with continued contributions, the same 5th-of-the-month rule keeps applying to every extension block, so the timing habit is worth keeping for as long as the account stays open.
Common mistakes with PPF deposit timing
- Depositing on the last day of the month, thinking any date within the month counts the same.
- Forgetting the Rs 500 minimum yearly deposit and letting the account lapse.
- Assuming the interest rate used in an old calculation still applies; the rate is revised quarterly by the government.
- Making a once-a-year lump sum deposit on 6 April or later: it loses April's interest on the full amount, the biggest single-month loss you can make.
This is general information based on the published scheme rules and the interest rate at the time of writing, not investment advice. Confirm the current quarter's PPF rate on the National Savings Institute or India Post site, or with your bank, before making a large deposit decision. For other fixed-return products with similar timing questions, see the FD calculator or the RD calculator.
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Frequently asked questions
What happens if I deposit into PPF on the 6th of the month?
That deposit will not be counted in the balance used to calculate interest for that month, since the check happens right after the 5th. It only starts earning interest from the 5th of the following month onward.
Does the 5th-of-month rule apply every month or only in April?
It applies every single month of the year, not just at the start of the financial year. Any deposit made after the 5th of any month loses that month's interest on the deposited amount.
Is PPF interest compounded monthly or yearly?
The lowest monthly balance is used to work out interest for each month, but the interest itself is credited to the account only once, at the end of the financial year, after which it starts earning interest in the following year.
What is the current PPF interest rate?
The government has kept the PPF rate at 7.1% per annum for several consecutive quarters, including July to September 2026, per the National Savings Institute rate table checked in September 2026. Rates are revised quarterly, so check the current rate before making a large deposit.
Can I deposit into PPF only once a year and still get full interest?
Yes. A single lump sum deposited on or before 5 April, at the start of the financial year, earns interest for the maximum number of months available that year, which is often simpler than tracking monthly deposit dates.
Sources
- National Savings Institute (Ministry of Finance), Public Provident Fund Scheme 1968 text, para 8: interest on lowest balance between close of the 5th and month-end (checked 2026-09)
- National Savings Institute, Public Provident Fund Account (Rs 500 minimum, Rs 1,50,000 maximum per financial year; scheme rules 1968 and 2019) (checked 2026-09)
- National Savings Institute, interest rates on National Savings Schemes (PPF 7.1% for Jul-Sep 2026) (checked 2026-09)
Rules and limits change. Always check the latest official notification or portal before you submit a form.