Public Provident Fund: Here’s how to make Rs 1 crore with PPF

Public Provident Fund (PPF) is not just a good investment option but it brings along income tax benefits, the interest earned as well as final maturity amount on PPF deposits which are tax-free.

But there are several investors who have no knowledge of how interest is calculated on PPF investment. An investor can save an amount as big as Rs 1 crore but for that one needs to understand the timing of investment, whether lump-sum investment or monthly investment is more beneficial, and how the interest will be calculated on your deposits.

Since 2020, the government has kept the PPF interest rate unchanged at 7.1% and it further announced a sharp cut in the interest rates on small savings schemes including PPF.

On a monthly basis, the interest on the PPF balance is calculated and it is credited to the account of the subscriber-only at the end of the financial year (March 31).

PPF calculation

The minimum balance in the PPF account is calculated between the fifth and the end of each month and if a subscriber invests after the 5th day of a month, then he will get interest on the previous month’s balance. But if the investment is before the 5th day of a month, the customer can get an interest on the current month’s balance also, along with the previous month’s balance.

If you think of reaching the target of Rs 1 crore through PPF, you should consider depositing money in the account before the 5th day of a month.

Let's make a break up of how much one needs to invest every month to accumulate Rs 1 crore with PPF.

Currently, with 7.1% interest, your PPF account will have a corpus of around Rs 40 lakh after 15 years if you invest Rs 1.5 lakh per year (or Rs 12,500 per month in PPF account.)  This calculation is done while keeping the interest rates unchanged for 15 years. 

Notably, the PPF interest rate is constantly changed by the government on a quarterly basis. Hence, the PPF interest rate may go up or down through the investment period.