The Public Provident Fund (PPF) is one of India’s most trusted long-term savings instruments. It offers guaranteed returns, tax benefits, and safety backed by the Government of India. But two questions often trouble savers –
- What is the interest rate for PPF in FY 2025-26?
- When and how is that interest credited to the PPF account?
In this blog, we’ll go through the latest interest rate, how interest is calculated, the date of credit, and practical tips to make sure you maximize your earnings.
Current PPF Interest Rate for FY 2025-26
As of the latest update –
- The PPF interest rate is 7.10% per annum for FY 2025-26.
- This rate is compounded annually and is uniform across all PPF accounts, whether held in post offices or banks.
The Government reviews the PPF rate quarterly, but so far for FY 2025–26, it has remained unchanged at 7.10%.
How PPF Interest Is Calculated?
Understanding the calculation method helps you plan deposits and maximize interest. Here’s how it works –
1. On a monthly basis, the lowest balance method
For each month, interest is calculated on the lowest balance between the 5th of the month and the last day of that month.
That means if you deposit later in the month (after the 5th), that amount may not fully count for that month’s interest.
2. Annual compounding
Although interest is computed monthly, it is credited once at the end of the financial year (31st March) and compounded.
3. Effective formula
The interest added is based on the sum of monthly balances (after applying the lowest balance rule) times 7.10% (annual rate), appropriately adjusted for months, and then added as a lump sum on 31st March.
When Will the Interest Be Credited?
- The interest is credited on 31st March every year, regardless of whether your account was transferred during the year.
- Even if your PPF account was transferred to another branch or to another bank in a fiscal year, the interest will still be credited at the end of the year.
- This means that any interest earned between April 2025 and March 2026 will be reflected in your account on 31 March 2026.
Why the 5th-day Rule Matters?
Because interest is based on the lowest balance from the 5th onward each month, deposits made before the 5th of each month are fully considered for that month’s interest calculation. If you deposit after the 5th, that deposit may not contribute to interest for that month, reducing your effective return.
So, for maximum benefit –
- Make your PPF deposit on or before the 5th of each month, or
- Lock in a lump-sum deposit early in the financial year (before 5th April) to let it earn interest for all 12 months.
Example Illustration
Suppose your PPF balance is Rs 1,00,000 at the start of April 2025, and you deposit ₹1,20,000 before 5th April.
- After 5th April, the balance would be ₹2,20,000.
- If you keep the balance stable for all the months, the lowest balance considered between the 5th and the end of every month will be ₹2,20,000.
- Annual interest = ₹2,20,000 × 7.10% = ₹15,620 (will be credited on March 31, 2026).
If you instead deposit ₹1,20,000 on 10th April, then you would only be considered for ₹1,00,000 for the month of April, since that was the lowest amount between 5th till the end of April, and interest for the extra ₹1,20,000 will start accruing from May, which means you would lose out on that much interest.
Practical Tips to Maximize PPF Returns
| Tip | Why It Helps |
| Deposit before 5th of each month | Ensures full amount counts for interest every month. |
| Make a lump-sum deposit early | Helps in compounding for the whole year. |
| Use the full annual limit early | The annual cap is ₹1,50,000; it’s better to use early. |
| Avoid multiple small late deposits | Fragmented late deposits may not get full interest. |
| Monitor rate changes | PPF rate may change quarterly, though stable now. |
Common Misconceptions
- Interest is paid monthly – Not correct. It is calculated monthly, but credited only annually.
- You get interest on the entire deposited amount, no matter when deposited – No. Because of the 5th-day rule, late deposits may lose some interest for that month.
- Interest is taxed – PPF interest is tax-free, and the scheme falls under the EEE (Exempt-Exempt-Exempt) domain.
Conclusion
The PPF interest rate for FY 2025-26 is 7.1% per annum, which will be credited to your PPF account on 31 March 2026. Interest is calculated monthly, i.e on the lowest balance between the 5th of each month and the month-end, and credited annually.
If you would like to earn the most interest on your PPF account, be sure to make contributions towards the end of the month or deposit a lump sum at the beginning of the financial year.
I can also create a simple visual timeline infographic illustrating how the interest accumulates month to month, and then gets credited at year’s end, if you wish. Would you like me to do that?
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