Now Reading: Rs 1.2 lakh lump sum beats Rs 10,000 monthly in PPF returns
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Rs 1.2 lakh lump sum beats Rs 10,000 monthly in PPF returns
A lump-sum investment of Rs 1.2 lakh per year in the Public Provident Fund generates nearly Rs 99,000 more in interest over 15 years compared to monthly deposits of Rs 10,000, according…
A lump-sum investment of Rs 1.2 lakh per year in the Public Provident Fund generates nearly Rs 99,000 more in interest over 15 years compared to monthly deposits of Rs 10,000, according to calculations at the current 7.1% annual rate. The PPF, a government-backed small savings scheme with a 15-year maturity, credits interest at the end of each financial year on the lowest balance held between the 5th and last day of every month.
The lump-sum strategy yields a maturity amount of approximately Rs 32.55 lakh (total investment Rs 18 lakh, interest Rs 14.55 lakh), while the monthly route yields about Rs 31.56 lakh (interest Rs 13.56 lakh). The advantage depends on depositing the lump sum before April 5 each year to earn full-year interest. The scheme allows a maximum of Rs 1.5 lakh per financial year and offers tax benefits only under the old tax regime.
Indian Opinion Analysis
PPF is one of several small saving schemes managed by the central government under the National Small Savings Fund framework. The key trade-off here is the interest calculation rule: PPF interest is computed on the lowest balance between the 5th and last day of each month, so monthly investments made after the 5th earn no interest for that month. A single lump sum deposited before the 5th of April earns a full year's interest, while monthly deposits maintain a lower average balance except for the first month in each financial year. For a salaried investor under the old tax regime, the Rs 1.5 lakh annual ceiling matters: a lump sum approach works only if the investor can commit the full amount early. The interest rate is reset quarterly by the Finance Ministry and can change, so actual returns over 15 years will differ from these projections.
Source: economictimes.indiatimes.com
This brief was synthesised by AI from the source linked above.
