How PPF Interest Is Calculated (and the 5th Rule)

26 October 2026 · ZapToolbox guides

PPF interest is worked out every month on the lowest balance in your account between the close of the 5th day and the last day of that month. The interest for all 12 months is added up and credited once a year, on 31 March, and that credit then starts earning interest from the next year. So money deposited on or before the 5th earns interest for that month, while money deposited on the 6th or later earns nothing until the next month.

Below we explain the PPF interest formula, show what the 5th-of-the-month rule is worth in rupees, and work out the 15-year maturity amount. You can check every figure with our PPF Calculator.

PPF interest rate today

The Ministry of Finance sets the PPF rate every quarter. It has been 7.1% a year for several years, and the government kept it at 7.1% for October–December 2026. The rate can change in any quarter, and a change applies to your whole balance, not just new deposits. Check the latest rate with India Post or your bank before you plan. All the examples here assume 7.1%.

PPF interest calculation formula

Each month:

Monthly interest = lowest balance between the 5th and month-end × (yearly rate ÷ 12 ÷ 100)

At the end of the financial year:

Yearly interest = sum of the 12 monthly interest amounts, which is credited on 31 March.

Within a year, interest doesn't earn interest. Compounding happens once a year, when the credited interest becomes part of the balance. With a single deposit made before 5 April, this works out to a simple yearly rule: closing balance = (opening balance + deposit) × (1 + rate).

Worked example: the 5th-of-the-month rule in rupees

Case 1: a lumpsum of ₹1,50,000 in April

• Deposited on 4 April: it counts in the lowest balance for all 12 months, April to March. Interest = 1,50,000 × 7.1% ÷ 12 × 12 = ₹10,650.
• Deposited on 6 April: April's lowest balance (after the 5th) doesn't include it, so it earns for only 11 months. Interest = 1,50,000 × 7.1% ÷ 12 × 11 = ₹9,762.50.

Two days' delay costs ₹887.50 in the first year. That interest would also have compounded for every year after.

Case 2: ₹12,500 every month

• If you always deposit by the 5th, the April deposit earns 12 months, May's earns 11, and so on down to March's, which earns 1. That adds up to 78 "deposit-months". Interest = 12,500 × 7.1% ÷ 12 × 78 = ₹5,768.75.
• If you always deposit after the 5th, each deposit loses a month (66 deposit-months). Interest = 12,500 × 7.1% ÷ 12 × 66 = ₹4,881.25.

(15-year values assume 7.1% throughout and the same pattern every year.) Depositing the full ₹1.5 lakh before 5 April gives the most. If you invest monthly, make it a habit to pay by the 5th. For online transfers, check when the money actually reaches your PPF account.

PPF maturity amount for 15 years

With ₹1,50,000 deposited before 5 April every year for 15 years at 7.1%:

• Year 1: (0 + 1,50,000) × 1.071 = ₹1,60,650
• Year 2: (1,60,650 + 1,50,000) × 1.071 = ₹3,32,706
• Year 3: (3,32,706 + 1,50,000) × 1.071 = ₹5,16,978
• … Year 15: about ₹40,68,209

You deposit ₹22,50,000 and earn about ₹18,18,209 in interest, all tax-free. If you extend the account in 5-year blocks and keep depositing ₹1.5 lakh a year, it reaches about ₹66.58 lakh after 20 years and ₹1.03 crore after 25 years at the same assumed rate.

Why does PPF beat a single ₹1.5 lakh left alone? A one-time ₹1,50,000 compounding at 7.1% for 15 years grows to only about ₹4.2 lakh. You can test this in the Compound Interest Calculator. The PPF result is large because you add fresh money every year, and each year's deposit compounds for the years left.

Other PPF rules that affect your interest

• Deposit limits: at least ₹500 and at most ₹1,50,000 per financial year. Any amount above the limit earns no interest.
• Tenure: 15 full financial years from the end of the year you opened the account. After that, you can extend it in blocks of 5 years, with or without fresh deposits.
• Tax: deposits qualify for Section 80C in the old regime, and both the interest and the maturity amount are tax-free (EEE).
• Loans and withdrawals: loans are possible from the 3rd to the 6th year and partial withdrawals from the 7th year, within limits.

Frequently asked questions

Is PPF interest calculated monthly or yearly?

Both. It is calculated every month on the lowest balance between the 5th and month-end, but credited and compounded only once a year, on 31 March.

What happens if I deposit in PPF on the 5th itself?

A deposit credited on or before the 5th counts for that month, because the lowest balance is taken after the close of the 5th day. If it reaches the account after the 5th, it starts earning from the next month.

What is the PPF maturity amount for ₹1.5 lakh a year?

At 7.1%, about ₹40.68 lakh after 15 years: ₹22.5 lakh deposited and about ₹18.18 lakh of tax-free interest. The real figure depends on future rate changes.

Is the PPF interest rate fixed for 15 years?

No. Unlike an FD, the PPF rate is reviewed every quarter and applies to your whole balance.

This guide is for information only and is not financial advice. PPF rules and rates are set by the government; please check the latest notification.