How PPF Interest Is Actually Calculated

Three rules, which almost everybody merges into one

A PPF account has one headline number and three separate rules governing what that number does to your money. Nearly every page about it collapses the three into a single sentence. Pulled apart, they are:

• When a rupee becomes eligible for interest. Decided monthly, on the lowest balance in the account between the close of the fifth day of that month and the end of it.
• When the interest actually arrives. Once a year, at the end of the financial year. Not monthly, not quarterly.
• What the rate is. Set by the Ministry of Finance and reviewed every quarter, which means nobody knows the rate that will apply in year twelve of a fifteen-year account.

Merge them and you get the sentence most pages print: PPF compounds annually at the prevailing rate. That is true, and it tells you nothing about the only variable you actually control, which is the date you deposit on.

Here is what it hides. Put ₹1,50,000 in on 5 April and it earns interest for twelve months of that year. Put the same ₹1,50,000 in on 6 April and it earns for eleven. There is nothing in between — no half month, no pro-rata from the sixth. The sixth is a cliff, and at 7.1 per cent that one day is worth ₹887.50 in the first year and ₹22,475 by the time the account matures.

Every figure on this page is arithmetic, worked from the rule as written. None of it is financial or tax advice, nothing here recommends a product, and a bank or post office statement is the authority on your own account — institutions round at different points. The point of showing the working is that you can check it.

What the Scheme actually says

This rule gets explained badly often enough that it is worth going to the notification rather than to a bank's blog. The scheme in force is the Public Provident Fund Scheme, 2019, notified by the Ministry of Finance (Department of Economic Affairs) on 12 December 2019 as G.S.R. 915(E), under section 3A of the Government Savings Promotion Act, 1873. India Post publishes the Gazette text as a PDF, and paragraph 7 is three sentences long:

Four things are settled by those three sentences, and they are worth reading one at a time.

"For a calendar month" — eligibility is decided twelve times a year, not once. Your deposit date matters because it lands inside one of those twelve windows.

"On the lowest balance … between the close of the fifth day and the end of the month" — the test is a minimum, not an average and not a closing balance. Money that was not already in the account at the close of the fifth is not in that month's figure, however long it sits there afterwards.

"Credited … at the end of each year" — and "year" is defined in paragraph 2(1)(f) as the financial year. So the credit lands on 31 March, which is why 5 April is the date people repeat: it is the last day you can deposit and still catch the first month of a fresh year.

"Interest at 7.9 per cent. per annum" — the Gazette text names a rate, and that rate has been wrong for years. PPF was cut from 7.9 to 7.1 per cent in April 2020 and has stayed at 7.1 ever since; the Department of Economic Affairs' quarterly review on 30 September 2026 left it at 7.1 for the October–December 2026 quarter, the twenty-sixth consecutive quarter at that figure.

That last point is the reason no calculator on this site has a PPF rate baked into it, including ours. A rate is a quarterly decision; the structure around it is a paragraph of law that has not moved since 2019. The two deserve very different levels of trust, and a page that prints them in the same sentence invites you to trust the wrong one.

The deposit limits sit one paragraph earlier. Paragraph 4 allows a deposit of not less than ₹500 and not more than ₹1,50,000 in a year, in multiples of ₹50, counted across your own account and any you hold for a minor.

Why the 6th is a cliff and not a slope

Work one month by hand and the shape becomes obvious. Say the account is empty and you deposit ₹1,50,000 on 6 April.

April's window runs from the close of 5 April to 30 April. At the close of 5 April the balance was zero. From the sixth onward it is ₹1,50,000. The lowest balance in that window is therefore zero, and April contributes nothing. May through March contribute ₹1,50,000 each — eleven months.

The same deposit made on the 5th is in the account at the close of the fifth, so April's lowest balance is ₹1,50,000 and all twelve months count. One day, one month of interest, and a monthly step of 7.1 per cent divided by twelve is 0.5917 per cent of ₹1,50,000, or ₹887.50.

Two rows there are worth stopping on.

Anywhere from the 1st to the 5th is identical. There is no advantage to the first over the fifth. People move money on 1 April believing it buys something; it does not, and a transfer that is initiated on the 4th and credits on the 7th does lose a month. The rule is about when the money is at the credit of the account, not when you pressed send. Allow for clearing.

A deposit on 31 March earns nothing at all for that year. It is inside that financial year for the deduction people are usually chasing when they deposit in March, and outside every one of that year's twelve eligibility windows. The March rush is the most expensive habit in this scheme, and it is expensive for a reason nobody mentions when selling the deduction.

Monthly or yearly, the penalty is the same number

The interesting case is someone paying in monthly rather than in one lump — ₹12,500 a month, twelve times, which is the ceiling spread evenly.

Pay on the 5th of each month and the twelve monthly minimums are ₹12,500, ₹25,000, and so on up to ₹1,50,000. Sum them and you get ₹9,75,000 of month-rupees; multiply by 7.1 per cent and divide by twelve, and the first year earns ₹5,768.75.

Pay on the 6th of each month and every one of the twelve minimums drops by one step: zero, ₹12,500, up to ₹1,37,500. That sums to ₹8,25,000 and earns ₹4,881.25.

The difference is ₹887.50 — the same number as the lump-sum case, to the paisa. That is not a coincidence, and it is the cleanest way to hold the whole rule in your head: slipping past the 5th costs you exactly one month's interest on the year's total deposit, whether that total arrives in one payment or twelve. Twelve late payments do not cost twelve months. They cost one.

The second comparison in those numbers is the bigger one, and it has nothing to do with the fifth. ₹1,50,000 deposited on 5 April earns ₹10,650 in year one. The identical ₹1,50,000 paid in twelve monthly instalments, every one of them on time, earns ₹5,768.75 — a little over half. On average, the monthly money has been in the account for about half the year, so it earns about half the interest. The instalment discipline is a cash-flow decision, not a returns decision, and it is worth knowing which one you are making.

The annual credit is what turns ₹887 into ₹22,475

Paragraph 7(2) is the sentence that makes the first two sections matter beyond a single year. Interest is credited at the end of the year, and from the next year it is part of the balance that earns.

So a month of interest you forfeit is not a one-off loss of ₹887.50. It is ₹887.50 that never joins the base, and therefore never earns anything itself for the remaining years. Over a fifteen-year account funded at the ceiling every year, with the rate held at 7.1 per cent so the comparison is clean:

Fifteen forfeited months at ₹887.50 each is ₹13,312.50 of interest. The actual gap at maturity is ₹22,474.55. The extra ₹9,162 is the compounding on money you never had, and it is the part a single-year calculation cannot show you.

The 31 March row is the one to take seriously. Depositing at the end of each financial year instead of the beginning of it costs ₹2,69,695 over fifteen years on identical deposits — more than one and a half years' worth of contributions, surrendered to a calendar date.

What the calculator assumes, exactly

Our PPF calculator takes a yearly deposit, a rate and a number of years, and compounds the balance annually with the deposit treated as arriving at the start of each year. That is a simplification, and it is worth being precise about what it costs you, because a vague answer here is the thing you came to this page to escape.

It costs nothing, for one specific case. Running the month-by-month rule from paragraph 7 against ₹1,50,000 deposited on 5 April each year for fifteen years at 7.1 per cent gives ₹40,68,209.22. The calculator's annual model gives ₹40,68,209.22. They agree to the paisa, because a deposit that is eligible for all twelve months of every year is a deposit at the start of the year, as far as the arithmetic is concerned.

So read the tool's output as the 1–5 April figure: the best case, achievable, and the number to aim at. If you deposit later in the year, or monthly, the real maturity is lower than what it shows — by ₹22,475 for a habitual 6 April, by about ₹1.24 lakh for monthly instalments, by ₹2.7 lakh for a March deposit, on the fifteen-year numbers above. The calculator will not model those for you, and this page is the honest version of that gap rather than a claim that the gap does not exist.

Two other things about it are worth saying plainly. The rate field is an input with a default, not a fact, for the reason paragraph 7(1) demonstrates so neatly — the Gazette itself prints a stale one. And it warns you above ₹1,50,000 because paragraph 4 is a ceiling, not a suggestion. Everything runs in your browser; your deposit figures are not transmitted anywhere, which is the general rule for the whole finance set.

If you want to see the annual-credit effect on its own, without the PPF rules around it, the compound interest calculator is the same arithmetic with nothing statutory attached, and the FD calculator is the quarterly-compounding version banks use — ₹1,50,000 for one year at the same 7.1 per cent earns ₹10,937 compounded quarterly against PPF's ₹10,650, and the whole difference is how often the interest is allowed to join the balance.

Withdrawals run on the same rule, in reverse

"Lowest balance" cuts both ways, and this is the half that gets no coverage at all. A withdrawal reduces the minimum for the month it happens in, so any amount taken out during a month earns nothing for that month — whether you take it on the 8th or the 30th.

Which means the mirror image of the deposit rule holds: a withdrawal pushed one day across a month boundary earns an extra month on the whole amount. Taking ₹10,00,000 out on 1 July rather than 30 June preserves June's interest on it, ₹5,916.67 at 7.1 per cent, and on a withdrawal in year eight of an account that money is still compounding for seven more years — ₹9,563 at maturity for a day's patience.

Paragraph 11(1) applies the same logic to closing the account: the accounts office pays "the entire balance along with due interest up to the last day of the month preceding the month in which the account is closed." Close on 2 April and you are paid interest up to 31 March. Close on 30 April and you are paid interest up to 31 March as well. A full month of balance, and no interest on any of it.

The rules on what you may take out, and when, are worth quoting rather than paraphrasing because the limit is unusually shaped. Under paragraph 10(1), any time after five years from the end of the year the account was opened — in practice, during the seventh year — you may withdraw up to fifty per cent of the balance at the end of the fourth year preceding the withdrawal, or at the end of the preceding year, whichever is lower, once in a year. Paragraph 13 allows premature closure, no earlier than five years from the end of the year the account was opened, on three grounds only — a listed medical case, higher education, or a change in residency status — and then pays interest "at a rate which shall be lower by one per cent. than the rate at which interest has been credited in the account from time to time."

No calculator on this site works out a withdrawal limit, and it is worth being clear about why rather than shipping one that guesses. The figure depends on your balance at the end of two specific past financial years, and nothing a tool can derive from a deposit pattern will tell it what those were. Your passbook will. The arithmetic after that is one multiplication.

The same idea, two statutory cousins

Once you have seen the PPF rule, you have seen the pattern that governs most Indian deposit and statutory arithmetic: the headline rate sets the scale, and a convention written into a scheme or an Act sets the number.

A recurring deposit is the same idea at a different granularity. Each instalment earns for the time it is actually held, so the first one earns for the full tenure and the last for a month, and the maturity figure is always far below what the same total in a fixed deposit would make. Our RD calculator computes each instalment separately and adds them up rather than using the closed-form shortcut, for the same reason this page works April by April: the per-instalment view is what explains the answer. The figures line up with the PPF arithmetic above in a way that makes the point for itself — ₹12,500 a month for a year at 7.1 per cent matures at ₹1,55,860 in a quarterly-compounded RD, against ₹1,55,769 of PPF balance for the identical payments made by the 5th. About ninety rupees apart, from two completely different rulebooks.

Gratuity is the other side of the same coin: a formula where the convention, not the intuition, fixes the result. The Payment of Gratuity Act pays fifteen days of the last drawn salary for each completed year, worked out on a twenty-six day month rather than a thirty-day one, which is why the figure is higher than people expect. The gratuity calculator shows the formula figure and the statutory ceiling side by side, because which of the two binds is the thing you need to know. The trap there is the salary input: basic plus dearness allowance, not CTC.

In all three, the mistake is the same mistake. Someone reads the rate, multiplies, and gets a number that is wrong by an amount that has nothing to do with the rate.

Start here

1. Find out what date your deposit actually credits. Not the date you schedule the transfer — the date it appears in the passbook. A standing instruction set for the 5th that clears on the 7th has been costing you a month a year.
2. Move the date to the 1st, not the 5th. The eligibility is identical, and the four days of margin absorb a weekend, a holiday or a slow transfer. This is the only free money in this article.
3. If you deposit in March, move it to April. A March deposit misses every one of that year’s twelve windows, and on the ceiling over fifteen years that is a ₹2.7 lakh difference on identical contributions. The PPF calculator shows you the April figure; there is no arrangement of a March one that comes out ahead.
4. If you pay monthly, know what the convenience costs — roughly half the first year's interest against an April lump sum, and about ₹1.24 lakh over fifteen years at the ceiling. That may still be the right call for your cash flow. It should be a decision, not a surprise.
5. Re-check the rate every quarter and treat any number on any web page as an assumption, including the ones above. The structure in paragraph 7 has not changed since 2019. The rate changed twenty-six quarters ago and could change at the next review.
6. For a withdrawal or a closure, look at the month boundary. A day of patience either side of it is worth a month of interest on the whole amount.

BitsSolved builds web, mobile and SaaS products, and the reason this site has a calculator directory on it is that most of those tools began as something a client's product needed to get right. If you are building anything that computes money for a user — a deposit projection, a payroll figure, an EMI schedule — the lesson of paragraph 7 is the one worth carrying over: the formula is the easy part, and the convention around it is where the defects live. Settle the convention against the source text before anyone writes the function.