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Is the PPF interest rate fixed for the entire tenure of 15 years? How is the interest calculated? - Anonymous
No, the PPF interest rate is not fixed for the entire 15-year tenure.
It is reviewed and revised every quarter based on prevailing market conditions. So, the interest rate applicable to your PPF account may change multiple times during the 15-year period. For instance, the PPF interest rate has varied between 8.7 and 7.1 per cent in the last decade. For the current quarter, April to June 2025, it's 7.1 per cent.
How to maximise your PPF interest
The interest on your PPF balance is calculated every month but credited to your account at the end of the financial year. It is computed on the lowest balance in your account between the 5th and the last day of each month. Therefore, to maximise your interest earnings, it is advisable to make fresh deposits before the 5th of every month.
Suppose you have Rs 5 lakh in your PPF account on April 1 and you deposit Rs 50,000 on April 10. In this case, for April, your interest will be calculated only on Rs 5 lakh, because the additional deposit was made after the 5th of the month. At an interest rate of 7.1 per cent per annum, the interest for April would be Rs 2,958 (Rs 5,00,000 × 7.1 per cent ÷ 12).
Had you deposited Rs 50,000 before the 5th, the interest would have been calculated on Rs 5.5 lakh instead, giving you a higher return.
Another key point is that PPF interest is compounded annually, and the entire interest earned is completely tax-free.
Also read: No change in small-savings scheme rates for Apr-Jun 2025
This article was originally published on April 01, 2025.
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