The Public Provident Fund (PPF) is a long-term savings scheme backed by the Government of India, introduced in 1968. It is one of the most popular tax-saving instruments in India, offering the unique EEE (Exempt-Exempt-Exempt) tax status — meaning your investment, the interest earned, and the maturity amount are all completely tax-free. PPF accounts can be opened at any post office or designated bank branches.
PPF Rules & Limits
Rule
Details
Minimum Deposit
₹500 per year
Maximum Deposit
₹1,50,000 per year (across all PPF accounts)
Lock-in Period
15 years (extendable in 5-year blocks)
Current Interest Rate
7.1% p.a. (compounded annually, set by Govt quarterly)
Tax on Investment
Deductible under Sec 80C up to ₹1.5L (old regime)
Tax on Interest & Maturity
100% Tax-Free (EEE status)
Partial Withdrawal
Allowed from Year 7 onwards (up to 50% of balance at end of 4th year)
Loan Facility
Available from Year 3 to Year 6 (up to 25% of balance)
PPF Interest Calculation
PPF interest is calculated on the lowest balance between the 5th and last day of each month. This means you should deposit before the 5th of April each year to earn interest for the entire year. Depositing after the 5th of any month means you lose that month's interest on the deposited amount.
Interest is credited on 31st March every year
Effective formula: Balance(n) = (Balance(n-1) + Annual Deposit) × (1 + r)
PPF Maturity Example
📘 Example: ₹1,50,000/year PPF for 15 years at 7.1%
Annual Deposit
₹1,50,000
Interest Rate
7.1% p.a.
Tenure
15 years
Total Amount Invested
₹22,50,000
Total Interest Earned
₹18,18,209
Tax-Free Maturity Amount
₹40,68,209
Effective Tax Saving (30% slab)
₹45,000/year
PPF vs ELSS — Which is Better for Tax Saving?
Feature
PPF
ELSS
Returns
7.1% (government-guaranteed)
12–18% (equity, market-linked)
Risk
Zero
High short-term; lower over 10+ years
Lock-in
15 years
3 years (shortest 80C option)
Tax on maturity
Completely tax-free (EEE)
LTCG 12.5% above ₹1.25L/year
Best for
Risk-averse, retirement planning
10+ year horizon, wealth creation
Smart strategy: Invest ₹75,000/year in PPF (safe, EEE) + ₹75,000/year in ELSS to fully use the ₹1.5L Section 80C limit with balanced risk.
How to Open a PPF Account in India
Log in to your bank's net banking (SBI, HDFC, ICICI, Axis, PNB) or visit any Post Office
Navigate to "Open PPF Account" under Deposits or Investments
Enter PAN, nominee details, and make the first deposit (minimum ₹500)
Account activated within 1–2 working days
Important: Only one PPF account per person across all banks and post offices. A second account earns no interest and must be closed.
PPF Withdrawal, Loan and Premature Closure Rules
Partial withdrawal: Allowed from the 7th financial year — up to 50% of the balance at end of the 4th preceding year, once per financial year.
Loan against PPF: Available from Year 3 to Year 6 — up to 25% of balance at end of 2nd preceding year, at PPF rate + 1%.
Premature closure: Allowed after 5 complete years only for: life-threatening illness, higher education, or change to NRI status. A 1% interest penalty applies.
Frequently Asked Questions
Yes. A guardian can open a PPF account on behalf of a minor. However, the combined annual deposits across the guardian's own PPF account and the minor's account cannot exceed ₹1.5 lakh. Both accounts are treated as a single account for the ₹1.5L limit and 80C purposes. The account matures when the minor turns 18 + 15 years from opening, not just 15 years from opening.
After the 15-year maturity, you have three options: (1) Withdraw the entire corpus tax-free and close the account. (2) Extend the account in 5-year blocks without deposits — the balance continues to earn interest. (3) Extend with continued deposits in 5-year blocks (submit Form H within 1 year of maturity), continuing tax-free growth and 80C benefits.
PPF offers guaranteed, tax-free returns (7.1% currently) with no market risk — ideal for conservative investors. ELSS (Equity Linked Savings Scheme) mutual funds offer potentially higher returns (10–15%) but with market risk and a 3-year lock-in. If you are under 40 with a long time horizon, ELSS generally outperforms PPF. For those nearing retirement or risk-averse, PPF is superior. Many advisors suggest a combination of both.
If you fail to deposit the minimum ₹500 in a financial year, your PPF account becomes "inactive." To reactivate it, you pay ₹50 as penalty per year of default plus ₹500 as the minimum deposit for each defaulted year. An inactive account does not lose its accumulated balance or interest — it just cannot receive new deposits or loans until reactivated.
📋 Disclaimer & Source: All data and calculations on this page are for informational purposes only and do not constitute financial advice. Rate data sourced from Ministry of Finance, Government of India and RBI notifications. Last reviewed: April 15, 2026. Consult a SEBI-registered advisor before investing. · Full Disclaimer