The Hidden Math Error in PPF Calculators (And Why It Costs You ₹1.5 Lakhs)

FV = P × [(1 + r)^n - 1] / r

Where:

• P = annual payment
• r = annual interest rate
• n = number of years

Example with ₹1.5L annual deposit:

pythonP = 150000
r = 0.071
n = 15

FV = P * (((1 + r)**n - 1) / r)
# Result: ₹41,76,407

This assumes: Interest compounds once per year. Reality: PPF interest compounds every month.

def calculate_ppf_accurate(annual_deposit, rate, years):
    """
    Accurate PPF calculation with monthly compounding
    """
    monthly_rate = rate / 12 / 100
    total_months = years * 12
    
    # Since deposits are annual but interest is monthly,
    # we simulate year-by-year calculation
    balance = 0
    
    for year in range(years):
        # Add annual deposit at start of year
        balance += annual_deposit
        
        # Calculate monthly interest for 12 months
        for month in range(12):
            monthly_interest = balance * monthly_rate
            balance += monthly_interest
    
    return round(balance, 2)

# Calculate with correct formula
result = calculate_ppf_accurate(150000, 7.1, 15)
# Result: ₹43,28,336

Difference: ₹43,28,336 - ₹41,76,407 = ₹1,51,929. That's ₹1.5 lakhs you'd miss if you used the wrong calculator.

Annual Compounding (Wrong):

Interest = 150000 × 7.1% = ₹10,650

Balance after Year 1 = ₹1,60,650

Monthly Compounding (Correct):

Month 1: Balance = ₹1,50,000

Interest = 150000 × 0.071/12 = ₹887.50 → New Balance = ₹1,50,887.50

...

Month 12: Balance = ₹1,60,979.18 → Interest credited: ₹10,979.18 (vs ₹10,650)

Extra earned in Year 1: ₹329.18 — which compounds for 15 years.

Production-ready algorithm (JS):

function calculatePPFMaturity(annualDeposit, interestRate, years) {
    let balance = 0;
    const monthlyRate = interestRate / 12 / 100;
    const yearlyBreakdown = [];
    
    for (let year = 1; year <= years; year++) {
        let yearStartBalance = balance;
        
        // Add annual deposit (assume deposited on April 5th)
        balance += annualDeposit;
        
        // Calculate interest for 12 months
        let yearInterest = 0;
        for (let month = 1; month <= 12; month++) {
            const monthlyInterest = balance * monthlyRate;
            yearInterest += monthlyInterest;
            balance += monthlyInterest;
        }
        
        yearlyBreakdown.push({
            year: year,
            opening: yearStartBalance,
            deposit: annualDeposit,
            interest: Math.round(yearInterest),
            closing: Math.round(balance)
        });
    }
    
    return {
        maturityAmount: Math.round(balance),
        totalDeposits: annualDeposit * years,
        totalInterest: Math.round(balance - (annualDeposit * years)),
        yearlyBreakdown: yearlyBreakdown
    };
}

Test it: calculatePPFMaturity(150000, 7.1, 15) → ₹43,28,336