What is a PPF (Public Provident Fund) Account?
The Public Provident Fund (PPF) is a government-backed long-term savings scheme introduced in 1968 by the National Savings Institute of the Ministry of Finance. It was designed to encourage small savings and provide retirement security to every Indian citizen, including those in the unorganized sector without access to EPF.
PPF stands out for its unique EEE (Exempt-Exempt-Exempt) tax status — your investment is tax-deductible under Section 80C, the interest earned is completely tax-free, and the maturity amount is also exempt from tax. No other fixed-income investment in India offers this triple tax advantage with government-guaranteed returns.
As of March 2026, PPF remains one of the most popular savings instruments in India, with over 5 crore active accounts. It's especially attractive for risk-averse investors who want guaranteed, inflation-beating, tax-free returns over the long term.
PPF Interest Rate 2026: Current Rate & History
The current PPF interest rate is 7.1% per annum, compounded annually. The government reviews PPF rates quarterly, though the rate has remained unchanged since April 2020.
PPF Interest Rate History (Last 10 Years)
| Period | Interest Rate | Change |
|---|---|---|
| April 2020 — Present | 7.1% | Unchanged for 6 years |
| Oct 2018 — Mar 2020 | 7.9% → 7.1% | Reduced in steps |
| Jul 2017 — Sep 2018 | 7.6% → 7.8% | Slight increase |
| Apr 2016 — Jun 2017 | 8.1% → 7.9% | Reduced |
| Apr 2013 — Mar 2016 | 8.7% | Peak rate in recent years |
How is interest calculated? PPF interest is calculated monthly on the lowest balance between the 5th and the last day of each month. However, it is compounded and credited only once a year, on March 31st. This means:
- If you deposit money before the 5th of any month, it earns interest for that entire month
- If you deposit after the 5th, you lose interest for that month
- Pro tip: Always deposit your PPF contributions between 1st and 5th of each month to maximize interest
PPF Account Rules & Features
| Feature | Details |
|---|---|
| Eligibility | Any Indian citizen (NRIs cannot open new accounts) |
| Account Limit | One account per person (minor child accounts allowed) |
| Tenure | 15 years (extendable in 5-year blocks indefinitely) |
| Minimum Deposit | ₹500 per year |
| Maximum Deposit | ₹1,50,000 per year |
| Deposit Frequency | Lump sum or up to 12 installments per year |
| Interest Rate | 7.1% (reviewed quarterly by government) |
| Compounding | Annually (credited on March 31st) |
| Tax Benefit | EEE — Section 80C deduction, tax-free interest, tax-free maturity |
| Loan Facility | Available from 3rd to 6th year |
| Partial Withdrawal | From 7th financial year onwards |
| Nomination | Mandatory; can nominate one or more persons |
| Transfer | Can transfer between banks/post offices |
| Attachment | Cannot be attached by court order (protected from seizure) |
PPF Maturity Amount Calculator: How Much Will You Get?
The PPF maturity amount depends on your annual deposit and the prevailing interest rate. Here's how different annual contributions grow over the 15-year tenure at 7.1%:
| Annual Deposit | Monthly Equivalent | Total Invested (15 yrs) | Maturity Amount | Interest Earned |
|---|---|---|---|---|
| ₹12,000 | ₹1,000 | ₹1,80,000 | ₹3,25,457 | ₹1,45,457 |
| ₹50,000 | ₹4,167 | ₹7,50,000 | ₹13,56,070 | ₹6,06,070 |
| ₹1,00,000 | ₹8,333 | ₹15,00,000 | ₹27,12,139 | ₹12,12,139 |
| ₹1,50,000 | ₹12,500 | ₹22,50,000 | ₹40,68,209 | ₹18,18,209 |
At the maximum contribution, you invest ₹22.5 lakh over 15 years and receive ₹40.68 lakh — completely tax-free. That's ₹18.18 lakh in tax-free interest, which would be fully taxable if earned through an FD.
Want to see how this compares to a lump sum or SIP investment? Use our SIP calculator or FD calculator to compare returns.
PPF Extended Beyond 15 Years
After the 15-year maturity, you can extend your PPF account in 5-year blocks indefinitely. You have two options:
- Extension with contributions: Submit Form H within 1 year of maturity. You continue depositing and earning interest. All tax benefits continue.
- Extension without contributions: Don't submit any form. Your existing balance continues to earn interest at the prevailing rate, with one withdrawal allowed per year.
If you invested ₹1.5 lakh/year and extend for 5 more years (total 20 years), your corpus grows to approximately ₹66.58 lakh. After 25 years: ~₹1.03 crore. After 30 years: ~₹1.54 crore. The power of compounding over long periods is extraordinary — read our compounding guide to understand more.
PPF Withdrawal Rules
Partial Withdrawal
Partial withdrawals from PPF are allowed from the 7th financial year of opening the account. The maximum you can withdraw is:
50% of the balance at the end of the 4th preceding year OR the balance at the end of the immediately preceding year — whichever is lower.
Only one partial withdrawal is allowed per financial year. Withdrawn amounts are tax-free.
Example
If your PPF account was opened in FY 2019-20, you can make your first partial withdrawal in FY 2025-26 (7th year). If your balance at the end of FY 2021-22 (4th preceding year) was ₹5,00,000, you can withdraw up to ₹2,50,000 (50%).
Premature Closure
Full premature closure is allowed after 5 financial years, only for:
- Life-threatening illness of account holder, spouse, dependent children, or parents
- Higher education of the account holder or dependent children
- Change of residency status (NRI status)
A penalty of 1% reduction in interest rate applies on premature closure. For example, if the prevailing rate is 7.1%, interest will be recalculated at 6.1% for the entire tenure.
PPF Loan Facility
You can take a loan against your PPF balance from the 3rd financial year to the 6th financial year. Key details:
- Loan amount: Up to 25% of the balance at the end of the 2nd preceding year
- Interest rate: 1% above the PPF interest rate (currently 8.1%)
- Repayment: Must be repaid within 36 months. Interest is paid in 2 lump sum installments.
- Second loan: Allowed only after the first loan is fully repaid
From the 7th year onwards, partial withdrawal (interest-free) is a better option than loan.
PPF Tax Benefits Explained
PPF's EEE status makes it the most tax-efficient fixed-income investment:
| Stage | Tax Treatment | Section |
|---|---|---|
| Investment | Deductible up to ₹1.5 lakh | Section 80C |
| Interest Earned | Completely tax-free | Exempt |
| Maturity Amount | Completely tax-free | Exempt |
| Partial Withdrawal | Tax-free | Exempt |
Effective Pre-Tax Return Comparison
Since PPF returns are tax-free, the effective pre-tax equivalent return is much higher:
| Tax Slab | PPF Rate (Tax-Free) | Equivalent Pre-Tax Return | FD Needed to Match |
|---|---|---|---|
| 0% (No tax) | 7.1% | 7.1% | 7.1% |
| 5% slab | 7.1% | 7.47% | 7.47% |
| 20% slab | 7.1% | 8.88% | 8.88% |
| 30% slab | 7.1% | 10.14% | 10.14% |
For someone in the 30% tax bracket, PPF's 7.1% tax-free return is equivalent to earning 10.14% from a taxable investment like FD. No bank FD comes close to matching this effective rate. Use our income tax calculator to see how your tax slab affects investment returns.
PPF vs FD vs ELSS vs NPS: Detailed Comparison
| Feature | PPF | Bank FD (5yr) | ELSS | NPS |
|---|---|---|---|---|
| Returns | 7.1% (guaranteed) | 6.5-7.5% | 12-15% (market-linked) | 9-12% (market-linked) |
| Risk | Zero | Very Low | Moderate-High | Low-Moderate |
| Lock-in | 15 years | 5 years | 3 years | Till age 60 |
| Tax on Investment | 80C (₹1.5L) | 80C (₹1.5L) | 80C (₹1.5L) | 80C + 80CCD(1B) |
| Tax on Returns | Tax-free (EEE) | Fully taxable | LTCG 12.5% above ₹1.25L | 60% tax-free, 40% annuity |
| Tax on Maturity | Tax-free | N/A | N/A | Partially taxable |
| Liquidity | Low (partial from year 7) | Moderate (penalty) | Moderate (3yr lock) | Very Low |
| Best For | Safe, tax-free base | Short-term safety | Growth + tax saving | Retirement |
The Verdict
- Choose PPF if: You want guaranteed, risk-free, tax-free returns and can lock in money for 15+ years. Best for the debt portion of your portfolio.
- Choose ELSS if: You have a 3+ year horizon and want higher returns with shorter lock-in. Best for growth + tax saving.
- Choose FD if: You need flexible tenure and liquidity. But accept that post-tax returns will be lower than PPF.
- Use all three: The smartest strategy is to combine PPF (safe base) + ELSS (growth) + NPS (retirement) for comprehensive tax-efficient wealth building.
Read our comprehensive tax-saving strategies guide for the optimal 80C allocation plan.
How to Open a PPF Account
Where Can You Open?
- Any post office in India
- Select nationalized banks (SBI, PNB, BOB, etc.)
- Major private banks (HDFC Bank, ICICI Bank, Axis Bank, Kotak)
- Online through net banking (SBI, ICICI, HDFC Bank offer online opening)
Documents Required
- PAN card (mandatory)
- Aadhaar card (for KYC)
- Passport-size photograph
- Address proof (Aadhaar, utility bill, or bank statement)
- Account opening form
- Initial deposit (minimum ₹500)
Pro Tips for PPF Deposits
- Deposit before 5th of every month to earn interest for the full month
- Deposit lump sum in April if possible — your money earns interest for the entire year
- Set up standing instructions with your bank for automatic monthly deposits
- Keep receipts/passbook updated for tax documentation
- Nominate someone at the time of opening to avoid legal complications later
Common PPF Mistakes to Avoid
- Depositing after the 5th: You lose an entire month's interest on that deposit. Always deposit between 1st-5th.
- Not investing the maximum: If you can afford it, invest the full ₹1.5 lakh. At 7.1% tax-free, there's no safer way to earn this kind of return.
- Forgetting minimum deposit: If you don't deposit at least ₹500 in a financial year, the account becomes inactive. Revival requires a penalty of ₹50 per year + the minimum ₹500 per year of default.
- Opening multiple accounts: Only one PPF account per person is allowed. A second account will be irregular, and the excess deposits won't earn interest.
- Not extending after 15 years: If your money is growing at 7.1% tax-free, why stop? Extend the account to continue the compounding magic.
- Withdrawing too early: If you withdraw at year 7 just because you can, you sacrifice the compounding effect. Only withdraw if absolutely necessary.
PPF Year-by-Year Growth: ₹1.5 Lakh Annual Investment
| Year | Deposit (Cumulative) | Interest Earned (Year) | Total Balance |
|---|---|---|---|
| Year 1 | ₹1,50,000 | ₹10,650 | ₹1,60,650 |
| Year 3 | ₹4,50,000 | ₹34,436 | ₹5,18,436 |
| Year 5 | ₹7,50,000 | ₹61,170 | ₹9,24,316 |
| Year 7 | ₹10,50,000 | ₹91,157 | ₹13,83,866 |
| Year 10 | ₹15,00,000 | ₹1,40,988 | ₹21,49,308 |
| Year 12 | ₹18,00,000 | ₹1,79,056 | ₹27,42,340 |
| Year 15 | ₹22,50,000 | ₹2,42,543 | ₹40,68,209 |
Notice how the interest earned in Year 15 (₹2.42 lakh) is almost as much as the entire annual deposit (₹1.5 lakh). This is compounding at work — by the end, your interest is earning significant interest of its own.
Frequently Asked Questions
The PPF interest rate is 7.1% per annum, compounded annually. It's reviewed quarterly by the government but has remained at 7.1% since April 2020. Interest is calculated on the lowest balance between the 5th and last day of each month and credited on March 31st.
Yes, PPF is better than tax-saving FD for most people. PPF offers EEE status (investment, interest, and maturity are all tax-free), while FD interest is fully taxable. For someone in the 30% tax slab, PPF's 7.1% is equivalent to 10.14% pre-tax — no FD can match this effective return.
No, NRIs cannot open new PPF accounts. However, if someone who had a PPF account becomes an NRI, they can continue the existing account until maturity (15 years from opening). They cannot extend the account beyond maturity.
Yes, a parent/guardian can open a PPF account on behalf of a minor child. However, the combined deposit in the parent's own PPF and the child's PPF cannot exceed ₹1.5 lakh per year. The child's account becomes self-operated when they turn 18.
If you don't deposit the minimum ₹500 in a financial year, the account becomes inactive/discontinued. To revive it, you must pay ₹50 penalty per year of default + ₹500 minimum deposit for each year of default + the current year's minimum deposit. The balance continues to earn interest even in discontinued accounts.
Banks (especially SBI, ICICI, HDFC) are recommended because they offer online deposit facility, easy account management through net banking/mobile apps, and seamless integration with your savings account. Post offices are suitable if you prefer in-person transactions or don't have access to these banks.