The Public Provident Fund (PPF) is a government-backed savings scheme that combines safety, tax benefits, and long-term wealth creation. A common doubt among investors is: Should I invest the full amount at once in April, or spread it across monthly instalments? And how important is the 5th of the month rule?
Let’s break down Annual vs Monthly Deposit in PPF – Which is Better for Higher Returns ? with examples, tables, and comparisons.
How PPF Interest is Calculated ?
- PPF interest is calculated on the lowest balance between the 5th and last day of the month.
- If you deposit before the 5th, that month’s interest will include your new deposit.
- If you deposit after the 5th, the deposit will not count for that month and will start earning from the next month.
Annual Deposit in PPF with Example
If you deposit ₹1.5 lakh on 1st April:
- The full amount earns interest from April onwards.
- At 7.1%, first-year interest is approximately ₹10,650.
If you deposit ₹1.5 lakh on 10th April:
- April’s interest is lost.
- Money starts earning only from May.
- First-year interest is lower by almost ₹900 compared to depositing before 5th April.
Monthly Deposit in PPF with Example
Suppose you deposit ₹12,500 every month:
- Depositing on 3rd April means that amount earns interest from April itself.
- Depositing on 10th April means April’s deposit will start earning only from May.
Even with proper timing, monthly deposits earn less compared to lump sum, because the full balance is not available from April.
Month-Wise PPF Interest Rule Explained
PPF follows a simple rule: Interest is given only on the lowest balance between 5th and last day of the month.
Deposit on or before 5th → earns interest from that month.
Deposit after 5th → earns interest only from the next month.
Example: ₹10,000 Monthly Deposit
| Month | If Deposited on 3rd (before 5th) | If Deposited on 10th (after 5th) |
|---|---|---|
| April | ₹10,000 earns from April | ₹10,000 earns from May |
| May | ₹20,000 earns from May | ₹10,000 (April) earns, May deposit from June |
| June | ₹30,000 earns from June | ₹20,000 earns, June deposit from July |
| July | ₹40,000 earns from July | ₹30,000 earns, July deposit from August |
| August | ₹50,000 earns from August | ₹40,000 earns, August deposit from September |
| … | … | … |
| March | ₹1,20,000 earns from March | ₹1,10,000 earns, March deposit from April next year |
Key takeaway: Deposits after 5th lose one month’s interest every time, which reduces overall returns.
Annual vs Monthly PPF Deposit – Yearly Comparison
Assuming ₹1.5 lakh investment per year at 7.1% annual interest:
| Year | Annual Lump Sum (before 5th April) | Monthly Deposit (before 5th) | Monthly Deposit (after 5th) |
|---|---|---|---|
| 1 | ₹1,60,650 | ₹1,59,100 | ₹1,58,200 |
| 5 | ₹9,25,000 | ₹9,12,000 | ₹9,00,000 |
| 10 | ₹21,50,000 | ₹21,20,000 | ₹21,00,000 |
| 15 | ₹42,00,000+ | ₹40,80,000+ | ₹40,00,000+ |
Which is Better – Annual or Monthly PPF Deposit?
- Annual Lump Sum Deposit (before 5th April): Best choice for maximum interest.
- Monthly Deposits (before 5th): Good for salaried investors, still efficient.
- Monthly Deposits (after 5th): Least efficient, leads to lower returns.
FAQs on Annual vs Monthly PPF Deposit
1. Should I deposit in PPF every month or just once a year?
Both options are perfectly okay. PPF doesn’t force you to choose one. The only real thing that matters is when your money goes into the account.
2. Why does timing matter so much in PPF?
PPF interest is calculated on:
- The lowest balance between the 5th of the month and month-end
- So if your money is in the account before the 5th, you earn interest for that month. If it goes in after, you don’t.
3. Why do people prefer an annual deposit?
When you deposit the full amount once a year (ideally in early April):
- Your money stays invested for the entire year
- You earn interest for all 12 months
- This gives a small extra advantage over late monthly deposits.
4. Does monthly deposit mean lower returns?
Not really.
If you deposit before the 5th every month, you still earn interest properly. The difference compared to annual deposit is usually very minor.
5. What’s the best way to do monthly deposits?
Just remember one thing:
- Deposit before the 5th of each month
- That’s enough to avoid losing interest.
6. Is there any limit on how often I can deposit?
Yes, but it’s simple:
- Minimum deposit in a year: ₹500
- Maximum deposit in a year: ₹1.5 lakh
- You can deposit once or multiple times in the year
7. Which option suits salaried people better?
It depends on your cash flow:
- Monthly deposit works if you like steady budgeting
- Annual deposit works if you get bonus or lump-sum income early
Both are fine as long as you’re consistent.
8. Does tax benefit change if I deposit monthly or yearly?
No.
Tax benefit under Section 80C depends only on the total amount deposited, not how or when you deposit it.
9. What if I miss a month in monthly deposits?
It’s not a problem at all.
- You can deposit later
- Just make sure the yearly minimum of ₹500 is completed
10. So what’s better annual or monthly?
Honestly, the better option is:
- Annual, if you can deposit early and forget about it
- Monthly, if consistency suits you more
PPF rewards discipline, not perfection.
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