Investing in PPF Before April 5th: What Investors Need to Consider for FY 2020-2021 and Beyond

Here is why you should not be in a hurry to invest Rs. 1.5 lakh into PPF within the first five days of April!

Published on / By M. Pattabiraman Twitter: @pattufreefincal / 26 Comments

Published: March 31, 2020 at 11:27 am

Last Updated on March 31, 2023

Now that the finance ministry has clarified that FY 2020-2021 will start from 1st April 2020, investors who wish to kick off their tax-saving exercise for the new FY can do so. In particular many have a habit of investing Rs. 1.5 Lakh between April 1st to April 5th to “maximise” the interest benefits of PPF. Here is what you need to consider before you do so this time (every time)

Investors who have not yet exhausted their 80C investments for FY 2019-2020 have been given until June 30th 2020 to so do. They will have to account for such transactions made bet April to June 2020 appropriately while filing for ITR. That is, they will have to either club those transactions as done in FY 2019-2020 or FY 2020-2021 making sure there is no double entry.

The reason why investors (who can afford to) invest the maximum amount within the first five days of April is well known. The entire Rs. 1.5 lakh (plus existing balance) would receive interest for the full financial year. This is also true for Sukanya Samriddhi Yojana. If the money was staggered then the amount of interest would be lower. We have already shown that over 15Y, considering inflation and the need to have substantial equity, when you invest in PPF does not matter much: Investing Before 5th vs. Investing After 5th. Also see: Sukanya Samriddhi Yojana vs PPF: An Illustration

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!


    🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

    Since PPF has a 15-year tenure (extendable in blocks of 5 years for life) the only two life goals it can be used for is retirement and children’s education (if started early enough and better than SSY for girls).

    For such goals, significant equity exposure is mandatory since most investors cannot afford to invest the amount necessary with 100% PPF/EPF exposure and still attain their goals. See why: Can I Plan My Retirement With Recurring Deposits and Fixed Deposits?

    At least 60% in equity for at least a few years would be necessary to stand a fighting chance against inflation. If investors rush to put in Rs. 1.5 lakh in PPF during the first five days of April each year, the asset allocation to equity would decrease.

    For many, it was not significant, to begin with. The sustained maximum investment in PPF can only make this worse. Investors will need to look beyond the tax-free comfort of high returns from PPF which is not sufficient for financial freedom after retirement.

    Only those who can afford to keep total fixed income exposure (PPF + EPF + FDs etc) to about 40-50% of the portfolio with rest in stocks can and should max out PPF each FY. Failure to do so can prove costly in the long run.

    FY 2020-2021 is especially a good year to invest in equity after the market crash. So any amount earmarked for PPF can be invested into equity if your portfolio has the necessary room for it. So do consider your asset allocation and your financial goals before rushing to invest Rs 1.5 lakh in the first days of the new financial year.

    My strategy: I use PPF for retirement (mine and my wife’s) and my son’s education goals (minor PPF + PPF acct of my mother). All PPF accounts are more than 10 years old and none of them ever saw fresh investments of Rs. 1.5 lakh because it was not suitable for the asset allocation I had in mind.

    I have thrice rebalanced from my equity mutual funds (tagged to my son’s portfolio) into PPF. This is how I was able to build a corpus equal to the current cost of UG education in the PPF accounts. This helped me stay calm during the crash.

    The right asset allocation is the key to successful investing. Not tax-saving, tax-free guaranteed returns. Investments that look secure and comforting now may come and hurt you hard.

    Do share this article with your friends using the buttons below.
    🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
    Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
    New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
    • Follow us on Google News.
    • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
    • Join our YouTube Community and explore more than 1000 videos!
    • Have a question? Subscribe to our newsletter with this form.
    • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
    Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!


      Explore the site! Search among our 2000+ articles for information and insight!

      About The Author

      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
      Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
      Our new course!  Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
      Our new book for kids: “Chinchu gets a superpower!” is now available!
      Both boy and girl version covers of Chinchu gets a superpower
      Both boy and girl version covers of Chinchu gets a superpower.
      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
      Feedback from a young reader after reading Chinchu gets a Superpower (small version)
      Feedback from a young reader after reading Chinchu gets a Superpower!
      Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
      Buy the book: Chinchu gets a superpower for your child!
      How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
      Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
      We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
      About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
      Connect with us on social media
      Our publications

      You Can Be Rich Too with Goal-Based Investing

      You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
      Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

      Your Ultimate Guide to Travel

      Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)