1. How PPF Interest is Calculated

The Public Provident Fund (PPF) interest is calculated monthly but compounded annually. The monthly interest is estimated based on the lowest balance between the 5th and last day of each month.

2. Monthly vs Annual Compounding

While interest appears to be calculated monthly, it's actually compounded annually. The formula shown calculates the monthly interest amount, but this amount is only added to your principal at the end of the financial year.

Where:

• \( Balance \) — Account balance (INR)
• \( Rate \) — Annual interest rate (%)

Key Point: The monthly calculation is for estimation purposes only - actual interest is compounded and credited annually.

3. Understanding the Calculation

Details: The monthly interest shown is what would be earned if calculated monthly, but PPF uses annual compounding where interest is added to principal only once per year.

4. Using the Calculator

Tips: Enter your current PPF balance and the current interest rate to estimate what your monthly interest would be if calculated monthly (though it's actually compounded annually).

5. Frequently Asked Questions (FAQ)

Q1: Is PPF interest really calculated monthly?
A: While it's calculated monthly based on your balance, the compounding happens annually.

Q2: When is PPF interest credited?
A: Interest is credited to your account at the end of each financial year (March 31).

Q3: Why show monthly interest if it's annual?
A: The monthly calculation helps estimate growth, but remember actual compounding is annual.

Q4: Does the monthly balance affect interest?
A: Yes, interest is calculated on the lowest balance between 5th and last day of each month.

Q5: How often does the PPF interest rate change?
A: The government reviews and announces PPF rates quarterly, though changes aren't frequent.