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View Full Version : gpf-how interest is calculated-every month or year

stkannan
10-04-2011, 08:43 PM
i was always under the impression that interest on gpf account is calculated every month applying rate 8% divided by 12 (i.e.on monthly basis). But one of my friend told that interest rate 8% is applied once in a year only. whether it is compounded monthly or annually. whether the monthly subscription and advance repayment would earn income by way of interest that month onwards(the month when subscription or repayment is deducted)

kannan

SASI
11-04-2011, 07:28 AM
GPF interest is compounded yearly. OB in a year will get interest for one year. Amount credited in April of a year will get interest for 12 months, May, 11 Months, and so on and the last credit of the year(March) will get interest for one month. Easy way of calculating is to find the sum of the progressive total of each month for a year and give it interest for one month.(sum of progressive total X 8%/12)

SASI

RKPATHAK
11-04-2011, 12:13 PM
You have to calculate progressive total on month to month basis and calculate accordingly

venkatcustoms
14-04-2011, 09:06 PM

gconnectsna
14-04-2011, 11:58 PM
The GPF interest allowed at the end of financial year is actually SIMPLE INTEREST (not compound interest as stated earlier by SASI). The interest is the sum of simple interest on the Opening Balance and monthly contributions minus the simple interest on any debits during the year.
For eg if your opening balance was 100000 with monthly contribution of 1000 each with no advance/withdrawal during the year you interest will be 8520 which is the sum of simple interest on opening balance (100000*8/100 = 8000) plus simple interest on each subscription (1000*8/100*12/12+1000*8/12*11/12+....1000*8/12*1/12 = 520). total = 8520.
If however in the above example there was a withdrawal in say April of say 50000 then you have to deduct simple interest on 50000 for 12 months (50000*8/100*12/12 = 4000) total = 8520 - 4000 = 4520.

SASI
15-04-2011, 06:53 AM
I said the interest compounds yearly.

sasi

krishnan09
15-04-2011, 08:52 AM
Mr.Sasi is correct in this regard and GpF interest compounds yearly. Interest which is calculated not only on the principal but also the accumulated interest of prior periods. Compound interest differs from simple interest in that simple interest is calculated solely as a percentage of the principal sum.

mahesh.teacher
01-06-2011, 12:18 AM
the interest is charged annually on our GFP contribution like someone contributing Rs 2000 for each month in April to May so interest will be

Ist way 2000X78X8/12X100=1040 mean the The interest for the year will be Rs 1,040
2nd way is 2000X12X8/12X100=160
2000X11X8/12X100=147 and so on we will calculate for each month and at the end of the year we will add that amount which is the interest for whole year