PPF Explained: The Complete Guide to the Public Provident Fund

The Public Provident Fund, almost always called the PPF, is one of the oldest and most trusted savings schemes in India. It has quietly helped generations of families build a tax-free corpus for retirement, a child's education or simply a safety net. If you want a low-risk, government-backed place to grow money over the long term, the PPF deserves a serious look. This guide explains exactly how it works.

What is the PPF

The PPF is a long-term savings scheme backed by the Government of India. You open a PPF account, deposit money into it each year, and earn a fixed rate of interest that is set by the government. The scheme has a tenure of 15 years, and the entire maturity amount, including all the interest, is completely tax-free.

Because it is backed by the government, the PPF carries effectively no risk to your capital. The trade-off is that the return is fixed and modest. You will not get rich quickly with a PPF. What you get is safety, tax-free growth and discipline.

The PPF interest rate

The PPF interest rate is 7.1 percent per annum for the April to June 2026 quarter. The rate is reviewed every quarter by the Ministry of Finance, so it can change, but historically it has moved slowly and stayed in a fairly narrow band.

Two details matter. First, the interest is compounded annually, so each year's interest is added to your balance and itself earns interest the next year. Second, interest is calculated on the lowest balance in your account between the 5th and the last day of each month.

How much can you invest

The PPF has clear limits:

• Minimum: ₹500 per financial year. If you do not deposit even this, the account becomes inactive.
• Maximum: ₹1,50,000 per financial year. Any amount above this earns no interest and is simply returned.
• Deposits: You can invest in a lump sum or in instalments, up to 12 times a year.

An important rule: you can hold only one PPF account in your name. You may also open one on behalf of a minor child, but the combined deposit limit across your own account and the minor's account is still ₹1,50,000 a year.

The lock-in and what happens after 15 years

A PPF account has a 15-year lock-in. The 15 years are counted from the end of the financial year in which you opened the account, so the effective period is often a little over 15 years.

When the 15 years end, you have three choices:

1. Withdraw the full amount. Take the entire tax-free maturity value and close the account.
2. Extend with fresh contributions. Extend the account in blocks of 5 years and keep depositing. You must inform the bank or post office within a year of maturity.
3. Extend without contributions. Leave the account open, make no further deposits, and the balance keeps earning interest. You can withdraw flexibly during this phase.

Loans and partial withdrawals

The PPF is not entirely locked away. It offers two ways to access money before maturity:

• Loan against PPF. Between the 3rd and 6th financial year, you can take a loan against your PPF balance. The interest charged on the loan is low, currently 1 percent above the PPF rate.
• Partial withdrawal. From the 7th financial year onwards, you can make one partial withdrawal each year, subject to a limit based on your balance.

These features make the PPF less rigid than it first appears, though it is still best treated as a long-term holding.

The big advantage: EEE tax status

The PPF enjoys what is called EEE status, which stands for Exempt, Exempt, Exempt. This is the most favourable tax treatment any investment can have. It means tax is exempt at all three stages:

• Exempt on investment. Your yearly deposit, up to ₹1,50,000, qualifies for a deduction under Section 80C of the Income Tax Act, if you are on the old tax regime.
• Exempt on interest. The interest your PPF earns every year is fully tax-free.
• Exempt on maturity. The entire amount you receive at the end is tax-free.

One caveat. The Section 80C deduction on your deposit is available only under the old tax regime. If you have chosen the new tax regime, your PPF interest and maturity are still tax-free, but the deduction on the deposit is not available.

What a PPF can build for you

Numbers make the case. Suppose you deposit the full ₹1,50,000 every year into your PPF and the rate stays around 7.1 percent.

You can model any amount and tenure with our PPF calculator. Try the 25-year figure. It is a striking example of compounding working patiently in the background.

PPF versus other options

The PPF is not competing with equity. It is the safe, tax-free anchor of a portfolio. A common and sensible approach is to use the PPF for the stable, debt part of your long-term money, and equity mutual funds through a SIP for the growth part. Our PPF vs mutual fund calculator compares the two side by side.

Who should use the PPF

The PPF suits you well if:

• You want a genuinely safe, government-backed place for long-term money.
• You value tax-free returns and want to use your Section 80C limit under the old regime.
• You are building the stable, low-risk portion of a retirement or long-term goal.
• You are self-employed and do not have an EPF account, and want a similar long-term safety net.

It is less suitable if you need the money within a few years, since it is locked in, or if this is your only investment and you have a very long horizon, because equity is likely to grow faster over 15-plus years.

The PPF will not make you wealthy on its own. But it is one of the safest bricks you can build a long-term plan with.

Open a PPF account at most banks or post offices, deposit before the 5th of the month, and let 15 years of tax-free compounding do the rest.