PPF: This small mistake by investors in PPF can lead to losses worth thousands and lakhs..

The Public Provident Fund (PPF) is one of the most reliable long-term savings schemes in India. However, many investors are unaware of one rule: the "5th Date Rule." This small rule can significantly impact your interest, sometimes costing you thousands or even lakhs of rupees. Let's understand it simply.

What is the 5th Date Rule in PPF?
The monthly interest in PPF is calculated based on the balance in the account on the 5th. This means that if you deposit money before the 5th, you receive interest for the entire month, but if you deposit money after the 5th, you don't receive interest for that month. Simply put, the timing of investing directly impacts returns.

Example:

Suppose you deposit ₹10,000 in PPF every month. If you deposit the money for April on the 6th, you won't receive any interest in April. Interest calculations will begin next month. Calculated using a 7.1% interest rate, repeating this mistake for 15 consecutive years could result in a loss of over ₹100,000 in interest.

What is the PPF interest rate?
The government sets the PPF interest rate every quarter. Currently, the PPF interest rate is 7.1% per annum. While PPF matures in 15 years, you can extend the scheme in blocks of 5 years. You can extend this extension any number of times.

Tax Benefits of PPF
PPF falls under the Exempt-Exempt-Exempt category. This means it offers three types of tax exemptions. First, you will receive a tax exemption under Section 80C on investments up to ₹1.5 lakh per year. Second, the interest earned on the investment will be completely tax-free, and third, no tax is payable on the entire amount received on maturity of 15 years.

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